7-Yr Paper In Focus, Calls At 2%

MONEY MARKET REPORT

There are signs of a bull run in the securities market with the new 12.59 per cent 2004 government paper being transacted at a premium of 80 to 95 paise.

With the Life Insurance Corporation cornering a sizeable chunk of the issue, there is not much of floating stock of the gilt to be found. This has fuelled a rise in the paper's price. Now that the Reserve Bank of India has changed the commission structure, the primary dealers were reportedly not aggressive when they bid for the securities at the auction held day before yesterday. The secondary market yield of this paper is the region of 12.40 per cent to 12.45 per cent. According to the treasury head of a public sector bank, there is, however, some resistance from buyers at Rs 100.85 to Rs 100.90. There was a marginal increase in the price of the securities with the 12.14 per cent 2000 went up to Rs 100.85 while that of the 12.69 per cent 2002 went up to Rs 101.90.

 

The interest rates in the inter-bank money market opened in the region of 3.75 per cent to 4 per cent. The rates, however, came down to 2 per cent by the close of the day. Money market dealers pointed out that most of the deals were struck in the region of 3 per cent.

There was not much of activity in the treasury bills segment. However there was some demand for the 14-day treasury bills maturing on June 21 at a level 3 per cent.

This is because banks are preferring to park their surplus in this paper rather than depend on call.