Call Yo-Yos In Tandem With Re, Gilts Stumped

Call rates were traded in the 6.75-7.25 per cent band today while government security prices went down by 45-50 paise as the forex market turned volatile in the aftermath of US attack on Afghanistan.

Call rate today opened higher around 7-7.25 per cent in the morning and stayed there for a couple of hours. The rates, however, slipped during the day to close around 6.75-7 per cent.

A dealer with a private sector bank said, "There was panic in the market as the rupee fell sharply in the morning. However, as the Reserve Bank governor expressed his comfort over the country's external economic condition, the rupee recovered and so also the overnight rates."

 

Dealers said that most of the deals were done in the 7-7.15 per cent range.

The Reserve Bank of India (RBI) today received a single bid of Rs 4,600 crore for its one-day repo auction which the central bank accepted at a cut-off rate of 6.50 per cent. There was no bid in the reverse repo auction.

Government security market faced high volatility today. Prices went down by 70-80 paise in the morning tracking the sharp fall of the rupee against the greenback. Prices, however, recovered a part of their early losses as the RBI governor said that the central bank's bias towards softer interest rate will continue. Dealers said that the prices recovered by 30-35 paise following the statement.

The treasury head of a private sector bank said, "There was no problem with liquidity in the market. Prices fell due to the worsening of sentiment and recovered as the sentiment improved on RBI governor's statement."

Call rates are likely to remain in the 7-7.50 per cent range tomorrow as the rupee may go down further. Government security prices are expected to go down by another 25-30 paise across all maturities.

A dealer with a nationalised bank said, "The sentiment is still subdued in government security market. If the rupee weakens further tomorrow, gilts prices will slump once again."