Gilts Staid Awaiting Policy Moves, Call Capped Soft

Trading in the government security market was dull today with prices moving in a 5-7 paise band. Call rates were soft and hovered in the 6.50-6.75 per cent range.

Government security prices opened at the level of yesterday's closing. It went up marginally and slipped subsequently on profit-booking. At the close, prices were almost levelled with yesterday's closing.

Said a primary dealer, "The prices are already at high levels, and there is very little chance of it rising further. Moreover, even the Reserve Bank of India (RBI) deputy governor has talked about a cut in the cash reserve ratio (CRR) to three per cent, and there will be other measures along with it. The market is taking time to judge what the impact of those measures could be."

 

In the call money market, liquidity was enough to keep the rates soft. Overnight rates opened in the 6.50-6.75 per cent range and stayed there throughout the day.

The treasury head of a private sector bank said, "there was very little demand in the overnight market. On the other hand, there was enough supply from the fund-flushed public sector banks. This kept call rates soft and unmoving."

There was only one subscription at the RBI-conducted one-day repo auction. The central bank accepted the bid at a cut-off rate of 6.50 per cent. There was no bid in the one-day reverse repo auction.

Trading in the government security market is expected to remain dull even tomorrow. A dealer with a foreign bank said, "The market is awaiting clear direction from the apex bank. Earlier, when the prices were so high, the RBI conducted open market operation. But this time the central bank has indicated a further cut in CRR." Call rates are likely to remain in the range of 6.50-6.75 per cent amid very low demand.