Thin Volumes Clip Gilts Amid Technical Worries

Government security prices fell by 15-20 paise at the longer end today amidst thin trading volumes. Call rates were ranged between 6.50 per cent and 6.65 per cent due to easy liquidity in the banking system.

Money market dealers said the sentiment was upbeat in the government securities market, but the newly introduced screen-based system caused problems for trading. They added that the connectivity was slow. Said a dealer: "The liquidity was good, and the market is expecting a cut in the small savings rate as well. However, we could not do trading properly because of the technical problems in the negotiated dealing system."

 

In the overnight money market, interest rates were soft and remained just over the one-day repo rate. Call rates opened between 6.50 per cent and 6.65 per cent and came down to close in the 6.50-6.60 per cent range.

Said a dealer with a public sector bank: "The demand for one-day money was low as most banks have already covered their cash reserve requirement for the fortnight. This kept call rates very close to the refinance rate."

The Reserve Bank of India today received seven bids of Rs 4,260 crore in the one-day repo auction. The apex bank accepted all the bids at a cut-off of 6.50 per cent. There was no bid in the one-day reverse repo auction.

The government securities market is likely to remain dull tomorrow with prices dipping marginally. Said the treasury head of a private sector bank: "There are two reasons why the market is expected to remain dull. Firstly, a section of the participants have taken a cautious approach before the budget announcement. Secondly, the negotiated dealing system can be a problem even tomorrow."

Call money rates, however, are expected to remain in the range of 6.50 per cent to 6.65 per cent.