Overnight Rates End Higher; Securities Dip

Call money rates went up to close at 7.10 per cent today compared with yesterday's closing of 6.95 per cent as some big lenders were absent in the market due to the proposed strike by a section of the Reserve Bank of India (RBI) staff tomorrow. The prices of government securities fell by 15-20 paise in tandem with high call money rates.

Overnight rates opened higher in the range of 6.80 per cent to 6.90 per cent but went up to close at 7.10 per cent.

A dealer with a private sector bank said, "There were very few lenders in the market who were concerned over the tomorrow's strike."

 

Dealers said though all the banks will remain open, the strike may effect the payment and settlement system.

The RBI did not receive any bid for one-day repo and reverse repo auctions. This is in contrast with Rs 9,500 crore of repo outflow yesterday. Dealers said the strike news was responsible for the absence of bids in the repo window.

The prices of government securities went up slightly in the morning because of the twin-auction announcement by the central bank, but came down to end by 15-20 paise.

The treasury head of a private sector bank said, "The announcement of the 25-year auction had a limited positive impact on the market as it will stretch the yield curve and generate trading-interest at that segment of the market."

He, however, added that the rally was arrested and the prices came down as there were concerns over RBI staff strike.

Call money rates are likely to remain between 6.90 per cent and 7.10 per cent tomorrow due to the presence of ample liquidity in the market.

A dealer with a nationalised bank said, "There will be some interruption to the call money trading because of the strike. But most of the banks and the primary dealers have covered their positions already and hence the demand will be thin."

Government security prices are likely to remain range-bound tomorrow. Dealers are expecting the prices to hover in the range of 10-15 paise around their current levels.