Call Rates Tighten On Auction Outflows

MONEY MARKET REPORT

Call money rates tightened yesterday following the outflow on account of the Rs 5,000-crore auction on Monday.

Sentiment in the securities market remains low despite the fact that there was a huge oversubscription to the auction. Gilts in the longer maturities continue to see low trading levels.

Dealers said that borrowings in the call money market also rose as banks tried to cover ahead of reporting Friday.

Tomorrow is a holiday for the market due to Budh Purnima. The recent relaxation of the daily cash reserve ratio requirement levels from 85 per cent to 65 per cent meant that some banks were belatedly trying to cover their fortnightly requirements.

"Call money rates moved up to the 8.5 per cent level on these factors towards the evening," said a dealer with a private bank.

The prices of the 11.10 per cent 2003 and 11.68 per cent 2006 securities auctioned on Monday moved in a narrow range yesterday.

While the 11.10 per cent 2003 was traded in an intra-day range of three paise and closed at Rs 104, the 11.68 per cent 2006 paper was traded in an intra-day range of three-paise and closed at Rs 107.67.

Prices in the long range saw almost no changes. "There is almost no trading in the longer end securities," said the chief dealer at a private bank.

However, dealers say that over the past two trading sessions, a large financial institution has been buying long-dated papers.

"Yields in the long-end are attractive. There is also the fact that the Reserve Bank of India is perhaps not likely to come out with auctions in the long-end in the near future. So the institution is probably buying these papers to make the best of the current yields," said a primary dealer.

Call rates are expected to stay tight up to reporting Friday, while security prices may be traded in a tight range.