Call, Gilts Clock Volatile Movement

MONEY MARKET REPORT

The prices of government securities saw volatile movement yesterday, and call money rates rose to 8.80 per cent before winding up lower at 8.25 per cent.

The call rates opened at 8.50 per cent as there was extensive demand for funds in the morning. They spiralled up to 8.70 to 8.80 per cent for one day and 8.90 per cent for three days.

Later, as the demand for funds came down, call receded to 8.50 per cent; most of the transactions were reported in the band of 8.50-8.60 per cent. Stray deals were also executed in the range of 8.25 per cent. In the securities market, the trading sentiment were very low. This is primarily due to the pressure on the rupee which touched 44.36 against the US dollar, and the 11-year auction announced by the government.

 

The central government announced late on Thursday evening 11-year yield based auction to raise Rs 5,000 crore on Monday.

During the early trading hours yesterday, gilts rose by 10 to 20 paise but dipped as news of auction spread among participants.

"The market was caught unawares about the auction. In fact, the players did not expect auction during this period," said a dealer.

"There is sufficient liquidity in the system but the players are not prepared for long-tenor paper due to depressed sentiment. This could result in a devolvement of the paper," said another dealer.

Traders also expect that the central bank may have to shell out higher commission to the primary dealers for the forthcoming auction. The call money rates are expected to be in the band of 8 to 8.25, while the prices of securities will be rangebound tomorrow. The trading volumes are expected to be low.