Call Sails Steady At 10%, Gilts Inch Up

Call money rates were stable in the 9.75-10 per cent range throughout the day, while government security prices moved up marginally by 5 to 10 paise yesterday.

Call rates opened around 10 per cent level. However, after the very initial hour of trading, the rate fell to 9.75 per cent. "With the rupee strengthening against dollar we expected Reserve Bank of India (RBI) to cut down repo rates," said a dealer said. "As the expectation was not realised, the rates went up to close at 10 per cent," he added.

The central bank mopped up Rs 6,795 crore through one-day and three-day repo auctions. The central bank, apart from mopping up Rs 1,345 crore through one-day repo, sucked out Rs 5,450 crore through three-day repo auctions. The cut-off rates for both the auctions were maintained at 10 per cent.

Government security prices moved up marginally yesterday as the rupee strengthened against the greenback. The treasury head of a private sector bank said, "The rates went up 10-15 paise in the initial morning hours." "However, as the RBI did not cut down repo rate, prices fell a bit," he added. Prices at the short and medium end close 5-10 paise higher than the Saturday's close.

Dealers expect the call rates to remain rangebound today. A dealer said, "The rates will hover around the 10 per cent as the RBI is unlikely to cut down repo rates substantially." A dealer said, "Tomorrow's state loan auction may push up the rates a bit. However, they may not cross 10.25 per cent."

Government security prices may stage a short rally of 10-15 paise today. A senior dealer said, "The liquidity situation is good and it will continue to remain good despite Tuesday's state loan auction and, hence, we expect little bit of buying at the short and medium end."

However, dealers seem to be concerned about the forex market. A dealer with a private sector bank said, "It is very difficult to predict the forex market nowadays. If rupee starts falling again, the sentiment in the gilt market may go down too."

Dealers, however, expect RBI to announce fresh auction in addition to tomorrow's state loan auction. The treasury head of a private sector bank pointed out, "Even an agency report said that RBI will conduct auction this week." "However, there will be minimal impact as the 11.40 per cent 2000 bond will mature on 29th of this month", he pointed out.