Call Rates Touch 7 Per Cent

MONEY MARKET REPORT

Rates in the overnight call money market ruled in the region of five to seven per cent. Money market dealers said that most of the deals were struck at six per cent. Initially, lenders were quoting higher rates at over 6.5 per cent. The apprehension that with the repo auctions and the auction of the ten-year paper there could be lack of liquidity led to the calls opening at a higher level. However, by the end of the day, the rates declined to 5 per cent. Of late, the call rates have been driven by the cut-off rate in the repo auctions. The Reserve Bank of India (RBI) yesterday announced a three-day repo auction scheduled for February 22.

In the auction of 10-year paper yesterday, the RBI cut the yield by 20 basis points to 13.65 per cent. The coupon on the earlier offer of government paper with a similar maturity was 13.85 per cent.

The reduction in the yields was in tune with expectations. According to a primary dealer, this security should be traded at a par. Others, however, believe that this paper will command a premium of 5 to 10 paise.

With the auction of 10-year paper scheduled, the securities market was charecterised by lack of activity. Even in the T-Bills segment, there was not much activity.