Call Whirls Up In Holiday Spirit, Spins Back To Sobriety

Call money rates flared up to 15 per cent due to pressure from the long weekend, but calmed down to settle at seven per cent today as the State Bank of India (SBI) lent heavily.

Government security prices which fell in the morning recovered later on to close little changed as compared to yesterday's level.

Call opened in the 15-16 per cent range due to the rush by banks to cover for next four days.

A primary dealer said: "The weekend this time is pretty long with Friday and Monday being holidays. This made the banks to rush for liquidity comfort and the rates shot up. However, there is no shortage of liquidity in the banking system."

 

Meantime, trading was very thin in government securities. But the high call money rates in the morning did pushed gilt prices down. Buying interest improved later as call rates eased.

A dealer with a new private sector bank said the trend in today's call and government securities was an aberration.

"In the gilts mart, nobody was interested to book a substantial position before the financial year end and this kept the volume at low levels. The long weekend created some problem in the call market which impacted the government securities market as well."

In the one-day repo auction, the Reserve Bank of India (RBI) received just one bid of Rs 5,000 crore.

The RBI accepted the bid partially mopped up Rs 2,500 crore from the market.

Money market dealers felt that the central bank did not want to put further pressure on call rates.

Call is expected to hover in the range of 6.75 per cent to 7.50 per cent on Saturday.

In government securities, the prices are likely to remain stable amid low trading volume as participants will stay on the sidelines on the last day of the financial year.

Dealers, however, are expecting marginal upward movement at the middle of the maturity scale.