Call Calm Around 10%, Gilts Edge Up

Call money rates fell to 9.25 per cent level while the government security prices gained a bit yesterday as the rupee moved up against the dollar in the forex market.

Call rates opened around 10.25-10.30 per cent in the morning hours. A dealer with a private sector bank said, "There was shortage of supply in the morning hours as the banks were taking stock of their accounts before the half-yearly closing and the call rates were high."

The rates, however, fell in the afternoon trade with institutional

lenders coming to the market. A dealer said, "The rates were around 9.25-9.75 per cent in the afternoon trade."

 

Another dealer said, "Liquidity situation was comfortable following the redemption of government security paper which made the rates slip."

The apex bank yesterday sponged out Rs 1,780 crore through its one-day repo auction. The cut-off rate in the auction was maintained at 10 per cent. The central bank, however, rejected the two bids of Rs 210 crore for the six-day repo auction.

Government security prices were stable in yesterday's trade. A dealer said, "There was not much activity in the market just before the half-yearly closing. Banks were not ready to take fresh positions."

However, the prices moved up marginally as the domestic currency strengthened against the greenback. Dealers said that prices have moved up by 10-15 paisa at the short-to-medium end.

Dealers expect the overnight rates to open low next week. "There is enough liquidity in the market following the redemption of government security yesterday and RBI is not likely to hike the repo rate. Hence, the call rates are likely to remain weak," said a treasury head.

Sentiment in the government security market is expected to go up as well. A dealer said, "As the call rates are likely to remain weak, the security prices may stage a rally. However, the forex market will definitely play a role."