Call Seen Hovering Above 14 Per Cent

"Cut-offs at repo auctions are the benchmark for call. As the Reserve Bank of India (RBI) is unlikely to slash that rate, call will continue to be over 14 per cent (this week)," said a dealer with a private sector bank.

Overnight rates opened around 14.5 per cent on Saturday. "They opened higher compared with Friday's close of 9 per cent following the repo rates," said a dealer. The rate had touched 14.5 per cent on Friday, which was the fortnightly reporting day for banks.

The rates moved around that level throughout Saturday. "There were some stray deals around 13.75-80 per cent, but most of them were executed in the 14.40-14.50 per cent range," the treasury head of a private sector bank said.

 

The liquidity situation in the coming week is likely to ease further following the redemption of treasury bills and coupon payments of government securities.

Apart from the redemption of 14-, 91- and 182-day treasury bills, Rs 52.1 crore is likely to come in to the banking system on account of redemption of 12.70 per cent government paper maturing in 2001. Moreover, Rs 131.5 crore will come in by way of coupon on 11.50 per cent state development loan paper maturing in 2008.

Another coupon of Rs 637.6 crore is likely to come from 11.5 per cent 2002 government security and 11.10 per cent 2001 state development loan. There is an expected outflow of Rs 100 crore on account of 182-day treasury bill auction.

Dealers, however, are not expecting any auction of government securities during the week. "If an auction takes place, there will be a large devolvement," a dealer said.

Meanwhile, the easy liquidity situation is unlikely to push call rates down, according to a dealer. "Liquidity is really not the problem," he said.

The treasury head of a foreign bank said, "It is the weak condition in the forex market that is affecting call rates and unless the rupee gets stabilised, call rates will continue to remain above 14 per cent," he continued.

The extra demand in first few days will also contribute to keeping call rates up this week."In the first few days of this week, call rates may cross 15 per cent because of the usual extra demand at the beginning of a new reporting fortnight," said a dealer.

"However, the rates will come down later and most of the trades will be done around the repo rates," he added.