Rbi Fund Shot Curbs Call; Gilts Surge

Call rates moved in a range of 6.90-7.25 per cent today, while the government security prices darted up by 20-25 paise at the medium and long ends following stability in the forex mart and improved liquidity in the banking system.

The Reserve Bank of India (RBI) had infused liquidity into the inter-bank money market by purchasing government securities through its open market operations (OMO).

Call rates today opened around 7.15-7.25 per cent in the morning. The rates went down gradually during the day to close around 6.90-6.95 per cent.

A dealer with a private sector bank said, "The demand was not very high as most of the banks have covered their positions already. Moreover, after yesterday's open market purchase the liquidity condition has improved as well. Both of these together brought overnight rates below the bank rate."

 

RBI today received no bid for its one-day repo and reverse repo auction. Dealers across the board said that the banks were not ready to part away with liquidity as the reporting fortnight approaches towards closing.

Government security prices staged further recovery today on the back of soft call money rate and better liquidity position in the market. Prices went up by 50-70 paise in the morning, but came down later during the day as the rupee weakened marginally. The net gain in prices during the day was 20-25 paise.

Said a dealer with a private sector bank, "The buying interest picked up in the morning with liquidity availed through open market window. However, sentiment was hit as the rupee crossed the psychological level of 48."

A dealer with a nationalised bank said that the fall in the prices in the closing hours was a correction move after the sharp rally in the morning.

Call rates are likely to remain in the 6.75-7.25 per cent range as the liquidity condition will improve further and the demand will be less on the eve of closing of the reporting fortnight. Government security prices are likely to move up by another 20-25 paise tomorrow.