Call Looks Up, Gilt Prices Slip

Call rates opened around 14.25-14.50 per cent in the morning hours. "Players were expecting repo rates to remain the same and hence were not ready to lend at a rate lower than 14 per cent," said a primary dealer.

The rates went up further in afternoon trades because of shortage of liquidity in the market after the repo auctions. Call rates touched 15 per cent at the close of the day.

The Reserve Bank of India (RBI) has mopped up Rs 3,945 crore through the one-day and five-day repo auctions. The central bank took out Rs 1,825 crore through the one-day repo at a cut-off of 14.50 per cent and Rs 2,120 crore through the five-day repo at 15 per cent. The cut-off rates were same as on Wednesday.

 

Government security prices have fallen by 40-45 paise at the short and medium end. "As high repo rates become a regular phenomenon, players have little interest in holding and buying government securities," said a dealer with a private sector bank.

The weakening of the rupee also pushed the prices down. "As the rupee weakened once again, RBI may tighten the liquidity further with new measures," said a dealer. This suspicion has also pushed the prices down.

Dealers are expecting a higher call rate and further fall in government security prices today. "Liquidity will be lower as the rupee is seen to dip further and repo rates are expected to remain unchanged," said the treasury head at a private sector bank. "Only if RBI intervene by selling dollars, the situation can improve," he added.