Calls May Hover Around 6%

MONEY MARKET

The interest rates in the inter bank overnight money market are expected to rule in the range of six to seven per cent during this week.

The prices of securities is likely to move upwards on account of softening of the call rates.

Last week the call rates ruled in the band of seven to eight per cent. For the first time on Saturday, the call rates came marginally below seven per cent to touch 6.75 per cent.

However, the possibility of the overnight call money rates touching six per cent is not ruled out.

This is because reportedly there would not be too much of pressure from borrowers in meeting their requirements.

 

Secondly, significant coupon inflows are expected in the second fortnight of this money from the Reserve Bank of India (RBI).

If the Reserve Bank of India continues to intervene then there will be a further build up of liquidity in the system.

The softening of the call rate could fuel activity in the treasury bills as well as in government securities.

During the course of last week the activity in the 91 day treasury bills market was negligible.

The reason being there was hardly any floating paper in the market.owing to Reserve Bank of India keeping the notified amount at Rs 150 crore.

The activity in the coming week would at best be concentrated on the 364 day treasury bills-especially those maturing next year.

The secondary market yields on 364 day treasury bills maturing next April is in the region of 9.30 per cent as against nine per cent that is being offered by the Reserve Bank of India at the auctions.

There is an auction of 364 day treasury bills scheduled for this week.

The money market dealers are keenly observing the rate offered by the Reserve Bank of India and the response it would provoke.

The Reserve Bank of India will have to offer higher rates to be able to raise large sums of money through this route.

In the dated segment the action will continue to be concentrated on the new paper which is the 12.69 per cent 2002.

There was hectic trading in this paper last week.

The price of this security was in the band of Rs 100.17 to Rs 100.23.

At the long end the 13.05 per cent 2007 was being quoted at a premium of 75 pasie.

But the quantum of trades in this paper was very small.