Funds Deluge Eases Call, Gilts Soar, Jack Back

The inter-bank call money market ended lower today at 6.40-6.60 per cent, compared with Wednesday's close of 6.60-6.80 per cent amid abundant liquidity in the banking system.

Government securities, which fell by 30 to 40 paise on Wednesday due to the explosions in Jammu, recovered their losses but slipped anew in late trade by 5 to 6 paise.

Most of the deals today were for four days because of the nationwide bank strike called on Friday by a bank employees union which has majority following, a dealer said.

Call money touched a high of 7 per cent and a low of 6.40 per cent during the day.

 

Dealers the banking system was awash with liquidity and some of the lenders came in to offer funds at 6.50 per cent also.

At the one-day repo auction held today by the Reserve Bank of India (RBI) under the liquidity adjustment facility, it received one bid amounting to Rs 400 crore and accepted the same at the cut-off rate of 6.50 per cent.

"The repo auction is an indicator of the liquidity obtaining in the money market and the players are keeping themselves fully covered. The demand for funds today was only moderate," said a private sector bank dealer.

"The easy liquidity scenario should prevail in the markets over the next few days as there are no major outflows. Also no auction announcement is expected," the dealer pointed out.

The heavily traded 9.85 per cent 2015 paper was dealt at Rs 114.04/06 for most part of the day but fell to 113.97/98 towards close.

The 11.50 per cent 2011 paper was dealt at Rs 124.44/46 but came down to Rs 124. 38 level in late evening trades. "Demand is gradually coming into the illiquid papers as they offer 20 to 30 basis points higher return compared to papers of similar maturities," said a dealer with a public sector bank.

The call money is expected to rule in the 6.50-6.80 per cent range tomorrow backed by ample liquidity. Gilt prices, provided nothing adverse happens on the country's borders, could edge up by 10 to 15 paise.