Auction Notice Keeps Rates Calm

Call rates were steady yesterday following the Reserve Bank of India's (RBI) announcement of an auction in two short tenor gilts. The market has reacted positively to the auction announcement with most expecting the auction to sail through with little or no devolvement.

Call rates opened at a level of 7 per cent and gradually crept up through the day to a level of 7.15 per cent with most deals being done in a range of 7-7.10 per cent. Call rates are expected in a range of 7-7.25 per cent for tomorrow.

Security prices moved up yesterday recovering some of the gains they had lost in the previous two trading sessions. Prices in the long end of the market fluctuated through out the day, finally closing up 5-7 paise.

 

"There was initially some buying interest in the long end of the market but when prices had moved up by about ten paise some profit booking was seen," said a dealer with a private bank. Short end maturities moved up by 7-8 paise for the day.

Most dealers say that the reissue of the 11.68 per cent 2006 and 11.10 per cent 2003 papers is likely to sail through in the market. "There is a good appetite for short tenor gilts and the RBI has taken advantage of that. If it had been a long term gilt, there would probably have been a devolvement," said a dealer with a private bank.

The 12.25 per cent 2010 paper saw a total turnover of Rs 160 crore on the wholesale debt market segment of the national stock exchange.

It closed at at a price of rs 110.60 underscoring an implicit yield of 10.47 per cent.

Money Market Operations

* Call/Notice money markets

Banks Primary Non-Bank Total Weighted

Borrowings 31 1268 0 1299 7.00

Lendings 16 65 25 106 7.28

* Term money market Volume Rate

1255 7.75-11.05

* Liquicity support availaed from RBI

Tier-I 8579 7%

Tier-II 0 9%

* RBI's open market operatins Nil

* Outstanding RBI repos 3000 5.00

Today's Market

* Inflow

Redemption of 14-day T-bill.............................Rs 100 crore

Redemption of 91-day T-bill.............................Rs 88 crore

* Outflow Nil

* Expected call rates....................................7-7.25 per cent