Auction Talk Peels Gilts, Call Narrow

Call money rates stayed in a tight range of 6.80 per cent to 7 per cent on the back of easy liquidity conditions in the banking system. But the prices of medium- and long-term government securities dipped by 10-15 paise following buzz of a possible auction during this week.

Dealers said the call rates opened in the range of 6.90 per cent to 7 and dipped a bit later to close in the range of 6.80 per cent to 6.90 per cent.

A dealer with a private sector bank said, "There was enough liquidity in the system. Also, most of the banks and primary dealers have covered their positions for the fortnight. These kept the overnight rates soft and in a narrow range."

 

The Reserve Bank of India did not receive any bid for its one-day repo and reverse-repo auctions.

"An auction is expected any time now, so the banks were not interested in parting with their liquidity, and hence there were no bids for the repo and reverse-repo auctions," said a dealer with a private bank.

Such talk had a dampening effect on government security prices too.

The treasury head of a private sector bank said, "The playeres are expecting an auction of at least Rs 5,000 crore this week. Though this will be a minuscule amount compared with the liquidity in the banking system, the concern is about the maturity period of the new issue."

Dealers said if the maturity of the new gilt was less than 10 years, the post-auction prices of government securities were expected to rally. They added that in the case of an auction of a long-term paper, prices might decline further.

Call money rates are expected to remain in the range of 6.75 per cent to 7 per cent tomorrow, while the government security prices are likely to go down by 10-15 paise at the long-end of the maturity profile.