Call Touches 8.25% On Tight Liquidity, Gilts Decline

Call money rates rose as high as 8.25 per cent on the back of tight liquidity condition following last week's OMO auction, while the government security prices dipped sharply by Rs 1-1.50 across all the maturites tracking firm overnight rates.

Call rates opened in the range of 6.70 per cent to 6.90 per cent and rallied to close between 7.50 per cent and 7.70 per cent.

Dealers said even though most of the deals were done in the range of 7.30 per cent to 7.50 per cent, some stray deals were struck at 8.25 per cent.

A primary dealer said, "Liquidity was tight and most of the lenders were not present in the market. Some private sector banks rushed in for liquidity to cover their CRR requirements. All these together pushed up the overnight rates."

 

The tightness of liquidity was clearly visible in the liquidity adjustment facility auction.

The Reserve Bank of India (RBI) received a bid of Rs 50 crore for the one-day reverse repo auction. The central bank accepted the bid at a cut-off rate of 8.50 per cent.

This is after a gap of more than one month that the apex bank received a bid for this auction. Last time the RBI received bids for reverse repo auction on November 2.

The government security prices opened 20-30 paise lower and dipped sharply by Rs 1-1.50.

The treasury head of a private sector bank said, "The market expected the high call rates and so the prices were lower. There were also rumours that the central bank may come out with another spate of OMO auctions during the week which also generated selling interest."

Dealers said the advance tax outflow that will start on December 15 has also caused concerns in the market.

Call money rates should remain high in the range of 7.25 per cent to 8.25 per cent tomorrow, while the government security prices will continue to fall as the liquidity will remain under pressure.