Gilts Dart Up On Funds Flood, Call Rangebound

Government security prices jumped by 30-40 paise today due to the easy liquidity scenario, while call rates ruled low in the 6-6.20 per cent range.

In the government security market, trading was mainly concentrated in the 8-13 year maturity bracket. Moreover, there was a shift of interest from liquid papers to semi-liquid ones as the market perceived that in the case of liquid paper yields are already low and prices are too high.

The advance tax outflows that had started from June 15 failed to have any impact, dealers said. Call rates ended the day in the 6-6.05 per cent band, while the opening band was 6.10-6.20 per cent.

 

Dealers said that the demand for call rates were low as most of the banks are well covered on their cash reserve requirement.

The easy liquidity condition in the market was observed at the daily repo auction where the Reserve Bank of India received three bids of Rs 10,210.30 crore. The apex bank accepted all the bids partially and Rs 7,658 crore was mopped up. There were no bids at the reverse repo auction.

There were Rs 536.5 crore of inflows due to the coupon payment on the 11.75 per cent 2004 paper and the 12.10 per cent 2008 government paper.

Tomorrow there will be inflows to the tune of Rs 13.4 crore due to the coupon payments on the 6.50 per cent 2004 paper. Along with that, there will be outflows of Rs 250 crore due to the auction of the 91-day treasury bill conducted today.

Call rates are likely to remain soft and may rule in the 6-6.25 per cent range. Government security prices are likely to move up by another 30-40 paise at the medium term.