Securities, Overnight Rates Move In Narrow Lane

Government security prices decreased by 2-5 paise today amidst thin trading volume due to the nationwide strike called by the All India Bank Employees' Association.

Call rates were stable in the 6.60-6.75 per cent range throughout the day and the rates closed in the same range.

There was little bit of selling interest in government securities in the morning and prices fell by 8-10 paise. It recovered later and dipped again in the afternoon.

All nationalised banks and some of the leading primary dealers were out of action. Moreover, no deal settlements were done today.

A dealer with a private sector bank said: "There was a holiday-like situation in the market today. Though private sector banks were operating, they were cautious in taking any positions."

 

In the call money markets, too, volume was thin. Interest rates stayed in the 6.50-6.75 per cent band throughout the day.

A dealer with a private sector bank said that they have not done any deals in the call money market in the whole day. He said: "There were almost no borrowers and lenders for overnight money. Stray deals happened at different hours of the day."

Banks, flushed with funds, put their money in the repo auction as the call money market was inactive. The Reserve Bank of India (RBI) received bids worth Rs 8,300 crore at the three-day repo auction which the apex bank accepted at a cut-off rate of 6.50 per cent. There was no bids at the three-day reverse repo auction.

Trading volume in the call money market is likely to go up tomorrow. Dealers are expecting government security prices to rally, while call rates may remain soft in the range of 6.50-7 per cent.

A treasury head at a new private sector bank said: "The liquidity situation is good in the market and there is no more concern over the border tension. So we hope the prices to stage a rally."