Call Rates Nudges Down, Gilt Prices Edge Up

Call rates fell marginally to close in the 7-7.25 per cent range today against yesterday's closing of 7.25-7.50 per cent on the back of ample liquidity.

Government security prices inched up by 10-15 paise at the longer end as overnight rates softened.

Call rates opened in the 7.50-7.60 per cent band and dipped during the day to close in the 7-7.25 per cent range.

A dealer with a private sector bank said, "Nationalised banks had turned to the market after a brief pause, which made the liquidity situation easy once again. This caused the overnight rates to go down."

There were no bids either at the one-day repo or reverse repo auctions. A dealer said, "As the overnight rates were higher than the repo cut-off rate of 6.50 per cent, lenders preferred to be active in the call money market. On the other hand, borrowers were not interested in the reverse repo auctions as the cut-off rate was at 8.50 per cent."

 

As the call rates dropped and the liquidity situation improved, prices of government securities jumped. However, dealers said that the rally was short and was concentrated at the long end of the market.

A dealer said, "It was the nationalised banks which were mainly buyers in the gilts market." Dealers said that a major nationalised bank bought more than Rs 3,000 crore of securities in the last couple of days. Call rates are expected to remain in the 7-7.50 per cent range tomorrow as the liquidity situation is expected to remain comfortable.

A dealer said, "The liquidity position is good once again, only due to the high demand in the first week of the reporting fortnight which has been keeping the overnight rates slightly high."

With the liquidity remaining easy, prices of government security prices are likely to improve by another 10-15 paise.