Calls Stay Firm At 8.50 Per Cent

MONEY MARKET REPORT

Interest rates in the inter-bank overnight money market went up to over 8.50 per cent yesterday. Call rates opened in the region of seven per cent, and later shot up because of a problem faced by the State Bank of India (SBI) with respect to clearing of cheques.

Inspite of the calls going up, the T-bills continued to witness some activity. There were buyers of the 364-day T-bills maturing between April and June next year at yields around 8.80 per cent and 8.90 per cent. The day was witness to an all round increase in the prices of securities by around 10 paise to 15 paise on an average. The price of the 12.14 per cent which was trading at a premium of over 45 paise to 50 paise day before yesterday increased to Rs 100.65 paise. The price of the 12.69 per cent was Rs 101.25 while that of the 13.05 per cent 2007 was in the region of Rs 101.35.

 

It is surprising that the prices have continued their upward march in spite of the calls creeping up. Neither has the announcement of the auction of 7-year paper for raising Rs 2,000 crore dampened the market sentiment. Generally, when an auction is around the corner there is selling pressure as banks unwind their positions with a view to taking a position in the new paper.

This generally leads to a downward revision in the prices as well as a reduction in the trading volumes.