Laf Auction Batters Call Rates, Gilts On Upswing

Call rates come down to close in the 8-8.25 per cent range after the Reserve Bank of India (RBI) infused Rs 7,675 crore through reverse repo. Government security prices, however, tracked call rates and went up by 30 paise on an average.

Call rates today opened in the 10.75-11.25 per cent range in the morning and went up to touch an intra-day high of 12.25 per cent. The rates, however, came down after the liquidity adjustment facility (LAF) auction to close around 8-8.25 per cent.

Said a dealer, "Overnight rates were quite high in the morning. But very few deals happened at those rates as the borrowers refused to accept the liquidity at that rate expecting the RBI to pump in money through reverse repo. After the reverse repo auction, as expected call rates slipped back to eight per cent."

 

The RBI today received no bid for its one-day repo auction, but received 46 bids of Rs 7,715 crore in the one-day reverse repo auction. The central bank accepted 41 bids of Rs 7,675 crore at a cut-off rate of 8.50 per cent. The weighted average yields of bids accepted was 8.51 per cent.

Government security prices went up tracking the softening call rates. Dealers said there was huge interest in the newly auctioned 9.85 per cent 2015 paper. The average increase in price was 30 paise while for the 9.85 per cent 2015 security, the rise was of 60 paise.

Call rates are likely to open around nine per cent level tomorrow and settle down around eight per cent level at the end of the day.

A treasury head of a private sector bank said, "As the borrowers feel that the RBI will come to help them if call rates are too high, there should not be any deal at a very high rate." Government security prices are likely to move up further by 15-20 paise on the back of bank rate cut expectation.