Call In Sub-7% Territory, Gilts Pares 15 Paise

Call rates ruled high in the 6.90-7.20 per cent range today on the back of easy liquidity in the market. Government security papers fell by 10-15 paise at the medium and long end of the market on the eve of Rs 7,000 crore of twin auction.

Call rates today opened around 7.10-7.20 per cent in the morning. The rates, however, came down during the day to touch 6.90 per cent. A dealer with a private sector bank said, "Lenders were initially absent as market was afraid that the Reserve Bank of India (RBI) might take liquidity tightening measure on the back of continuous decline of rupee. However, as the central bank refrained from doing so, lenders came back to the market and the overnight rates fell below seven per cent."

 

The RBI today received two bids of Rs 7,050 crore for its one-day repo auction. The central bank accepted both the bids at a cut-off rate of 6.50 per cent. Dealers said that the huge bid in the repo auction gave comfort to the market as it reflected ample liquidity in the system.

Trading in the government security market remained dull as the dealers were waiting for the auction result to come. A dealer with a foreign bank said, "Market participants feel that the auction result will give an indication of what can be the future movement of interest rate and hence was not interested in taking any fresh position before that." The weakness of rupee played a little part behind the fall as well, he added.

Call rates are likely to be in the range of 6.90-7.20 per cent tomorrow. Government security prices are likely to fall by another 10-15 paise during the day.