Gilts Stable After Initial Hiccups, Call Supressed

Call rates remain in the 6.80-7 per cent range today on the back of comfortable liquidity in the system while the government security prices stabilised after a marginal decline in the initial hours of trading.

Call rates opened higher around 6.95-7 per cent in the morning, but slipped during the day to close around 6.80-6.85 per cent. A primary dealer said, "The demand was thin as most of the banks and the primary dealers are flush with liquidity. This has kept overnight rates below the bank rate of seven per cent."

The liquidity overhang in the system is reflected in the repo auction. The Reserve Bank of India (RBI) today received two bids of Rs 7,500 crore for its three-day repo auction which the apex bank accepted at a cut-off rate of 6.50 per cent. Dealers said that the bids were from two large nationalised banks.

 

Trading in the government security markets remained dull today on the back of auction outflow. A dealer with a private sector bank said, "Prices fell by 10-15 paise yesterday evening after the auction result, but as the liquidity condition in the market continued to remain good, the fall was arrested."

Dealers informed that there was a bit of buying interest in the late afternoon.

Call rates are likely to remain in the range of 6.75-7 per cent tomorrow on the back of comfortable liquidity.

The treasury head of a private sector bank said, "The liquidity condition is too good to be affected by Rs 6,000 crore outflow. Thus we do not see any major change in overnight rate." Government security prices are expected to move up by 10-15 paise. Dealers said, "There is enough liquidity in the market to support further rally. Market sentiment remained subdued for a brief period due to the open market operations. We expect the prices to rally once gain tomorrow."