Call Rates Trapped In 6 Per Cent Range

Prices hovered around the previous day's quotes and there was no appreciable movement. Most transactions during the day were recorded in the 13.5-per cent 1997 and the 13.5 per cent 1998 security.

There was considerable interest in the short-dated securities, especially the September 14 treasury bill.

The yield on this paper was worked out in the region of 5.75 per cent and 6 per cent. A number of banks, expecting that call rates would ease further, were parking money in the 91-day paper by borrowing in the call market.

When call rates are at a low, banks prefer to borrow in this market to invest in the short-term securities, specially the treasury bills.

 

Trading interest continued to be confined to the short-term securities as banks are unwilling to lock funds for the long-term. With the State Bank of India having cut prime lending rates by 0.5 per cent, market players were of the opinion that the fund position within the banking system would be easy..

The low rates at the shorter-end of the yield curve notwithstanding, there was no effort towards lowering the rates at the longer end.

Advance tax outflows aggregating Rs 2,500 crore is expected after September 15. "This outflow will, however, not have any impact on the market, as the rates have remained easy due to an easy liquidity situation," said a dealer in the money market.