Low Demand Softens Call, Gilts Move Up By 35-45 P

Call money rates softened to close at 6.50 per cent today on the back of thin demand and ample liquidity in the system. The government security prices went up by 35-45 paise over the medium- to long-term maturities.

Call rates opened in the range of 6.90 per cent to 7.10 per cent, but dipped during the day and closed in the range of 6.50 per cent and 7.10 per cent.

A dealer with a private sector bank said, "Lenders were quoting higher rates in the morning, However, as they did not find enough takers, they had to lower the rates."

 

Ample liquidity in the system was reflected in the huge amount through the bids for the Reserve Bank of India's repo auction. The RBI received six bids of Rs 11,780 crore for the one-day repo auction, of which the central bank accepted 50 per cent of two bids and 100 per cent of the other four aggregating to an amount of Rs 5,930 crore at a cut-off rate of 6.50 per cent. The apex bank did not receive any bid for the one-day reverse repo auction.

As the call rates softened, the government security prices rallied once again. Dealers said that the prices for the securities with maturity periods of 5-10 years went up by 40-45 paise, while the those at the long-end of the market raised by 35-40 paise. The yield of 10-year paper ended at 9.47 per cent.

A dealer said, "Prices rallied across all the maturities. However, as there has been already sufficient increase in the prices at the long-end of the market in the past one-and-a-half months, focus was mainly on the short- and medium-term securities."

Call money rates are likely to be in the range of 6.50 per cent to 7 per cent tomorrow. A dealer with a nationalised bank said, "As there is unlikely to be any pressure on the liquidity, call rates will be in between the repo rate and the bank rate." Government security prices are expected to move up by another 15-20 paise followed by profit-booking. A senior dealer said, "Prices have rallied sharply in the past two days and are likely to stabilise now."