Call Rates Decline To 7.50 %

MONEY MARKET REPORT

The prices of government securites went up across the board yesterday with significant buying pressure. The price of 13.05 per cent 2007 went up from Rs 100.20 to Rs 110.50. The price of the 13.85 per cent 2001 went up by 30 paise to Rs 104.50. The 13.50 per cent 1997 was quoted at Rs 101.60 while the 13.50 per cent 1998 was quoted at a rupee higher. The yields have begun to soften on expectations that call rates will decline. Interest rates in the inter-bank overnight money market opened in the region of 9.50 to 10 per cent and during the course of the day climbed down to 7.50 per cent.

Call rates may decline further to six per cent. This is on the assumption that liquidity will improve because of the intervention by the RBI in the foreign exchange market.

The apex bank has been mopping up dollars in the forex market with a view to keep the rupee from appreciating. There was not much activity in the T- bills market. Once calls moved up banks found it unattractive to fund holding of T-bills by borrowing from them. The RBI has reportedly told the banks and primary dealers not to base their yields expectations in the forthcoming auction of five-year on the basis of secondary market yields.

The apex bank has also advised banks not to base their expectations on the basis of prevailing call rates.