Government security prices remained range-bound today ahead of Rs 5,000 crore of 15-year paper auction. Call rates continued to remain soft and hovered around 6.50-6.75 per cent.
In the government security market, traders took a cautious approach as everybody was waiting for the auction result. Prices moved in a 10-20 paise range, around yesterday's levels, across all maturities.
A primary dealer said, "The cut-off yield of the 15-year paper will guide the future price movement. As the prices have already gone down too much, nobody was interested in taking a position before getting the Reserve Bank of India's (RBI) view which will be reflected in the cut-off yield of the auction. That's why any increase in price attracted profit-booking today."
More From This Section
In the call market too, the movement was range-bound. Overnight rates stayed around 6.45-6.65 per cent throughout the day.
A dealer with a public sector bank said, "The liquidity situation continued to be easy so the rates stayed almost in the same range as yesterday. Given the market liquidity and demand for call money, the rates could have fallen but for the repo rate of 6.50 per cent"
The RBI today received seven bids of Rs 5,570 crore in the one-day repo auction and the apex bank accepted all the bids at a cut-off rate of 6.50 per cent. The central bank did not receive any bid for its one-day reverse repo auction.
Government security prices are likely to go up tomorrow as the auction is expected to draw good response. Dealers said that the Rs 5,000 crore of outflow on account of today's auction will not hurt the liquidity comfort too much. Hence, call rates are likely to continue in the 6.50-6.75 per cent range.