Eroding Re Sends Call Skywards, Gilts Stymied

Call rates were traded in the 7.10-7.85 per cent range today compared to yesterday's band of 6.95-7.35 per cent while government security prices came down by 10-15 paise at the medium and long end of the market on the back of volatility in the forex market.

Call rates today opened higher around 7.10-7.15 per cent in the morning and went further up to 7.85 per cent as the rupee fell to its all-time low of 47.58. The rates, however, came down later during the day and closed around 7.15-7.25 per cent as the rupee recovered in the afternoon.

A primary dealer said, "There were two reasons behind high call rates. Firstly, there was worry over weakness of the rupee against the dollar and secondly, big lenders were not ready to part with liquidity on the concern over advance tax outflow starting from September 15."

 

Dealers said that that most of the deals were done in the range of 7.50-7.60 per cent.

The Reserve Bank of India (RBI) today received no bid for its one-day repo and reverse repo auction. Money market dealers said it shows the sign of relatively tight liquidity condition in the money market.

Government security prices fell by 10-15 paise in the morning tracking a very high call rate and weak rupee.

The treasury head of a private sector bank said, "There was no chance of any bank rate cut. Rather the liquidity might be tightened if the volatility in the forex market continues. This forced the government security prices to go down today."

Call rates are likely to remain high tomorrow and rule in the band of 7.15-7.75 per cent tomorrow. Government security prices are expected to go down by another 10-15 paise at the medium and long end of the market.

A senior dealer said, "We expect the rates to open around 7.15-7.20 per cent and went up during the day as the rupee may go down further against the dollar."