Gilts Decline 10-15 Paise Despite Inflow

MONEY MARKET REPORT

The prices of government securities saw a fall of 10 to 15 paise across the board despite an inflow of Rs 1,200 crore into the banking system. The liquidity in the system too continued to be tight with the call money rates ruling in the band of 8 to 8.10 per cent.

The call money rates opened at around 8.15, while borrowers were quoting 7.90 per cent. The rates slowly dipped and most deals were done in the range of 8 to 8.10 per cent. Some stray deals were reported at 7.90 per cent during the end of the day.

Dealers said that liquidity continues to be tight which has lead to high call rates triggering massive selling of securities and thus leading to fall in prices. Money market experts feel that the liquidity scenario is unlikely to change in the future.

Dealers said that the call money rates would continue to be at around 8 per cent, 100 basis points higher than the current bank rate.

While the securities prices is expected to see a further fall over a period of time. "All the longer tenure securities were badly hit owning to selling pressure," said a dealer.

According to a senior money market experts, "Each time the price of the securities moves up, some traders would enter to book profit by selling security. Effectively each time the price goes up by say five paise, there will be a fall of 10 paise due selling pressure and profit booking."

Moreover the market is also expecting the RBI to announce a dated government security auction anytime now owning to the inflow of Rs 3182 crore by the end of this month owing to the redemption of 12.14 per cent security.