Jalanspeak Smothers Downgrade; Gilts, Call Surge

Call rates stayed in a slightly higher range of 7-7.15 per cent today as lenders stayed away from the market due to the twin auction of Rs 6,000 crore.

Government security prices recovered after the Reserve Bank of India (RBI) governor said that he maintained his soft bias on interest rate. Prices went up by 10-15 paise at the medium to long end of the market.

Call rates opened in the 7-7.05 per cent range in the morning and inched up during the day to close around 7.10-7.15 per cent.

A dealer said, "The liquidity condition was good, but because of today's auction some lenders were not in the market and this pushed up overnight rates a bit."

 

A dealer with a new private sector bank said, "Some banks who have not covered their position rushed for liquidity today which also pushed up the overnight rates."

The apex bank did not receive any bid for its one-day repo as well as reverse repo auctions.

Dealers said that the auction announcement prevents the banks and primary dealers to put money at the repo window.

Prices in the government security market staged a recovery today after the RBI governor's statement on interest rate.

Prices at the medium to long end fell by 40-45 paise yesterday evening after S&P downgraded India's local currency outlook. Prices, however, went up by 10-15 paise at the longer end today.

"Sentiment was heavily weakened after S&P's announcement, but RBI governor's statement made up for that and that caused the prices to go northward," said a dealer.

Call rates are expected to come down and remain below the refinance rate of seven per cent tomorrow because of lower demand in the overnight market on the eve of the close of reporting fortnight.

Government security prices are expected to move up by another 10-15 paise at the long end of the market but remained steady after that.