Call money rates went down to close in the range of 6.80 per cent to 6.90 per cent today compared with yesterday's closing range of 7 per cent to 7.25 per cent as the liquidity condition eased further. The government security prices went up by 10-15 paise at the medium- to long-end of the market on the back of a lower call money rate.
Call rates opened in the range of 7 per cent to 7.25 per cent but fell during the day. Dealers said most of the deals were done in the 7-7.15 per cent band. A dealer with a private sector bank said, "The state-run banks, flooded with deposits, were lending heavily in the market which brought down the overnight rates below the bank rate."
There were no bids for both the one-day repo auction and the reverse repo auction as lenders preferred call money. A dealer said, "The call rates, though lower than yesterday, were higher than the repo cut-off of 6.50 per cent. That's why lenders preferred the overnight market."
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The government security prices continued to go up as the overnight rates fell further. Dealers, however, said the rally was short and was concentrated at the medium- to long-end of the market. A primary dealer said, "The market is expecting an auction of long-term securities very shortly. This has kept the long-term segment of the market range-bound."
Call money rates are expected to remain in the range of 6.50 per cent to 7 per cent tomorrow because of the comfortable liquidity position. A senior dealer said, "The liquidity position has turned good once again and it is likely to remain so tomorrow. Hence, I expect the overnight rates to hover between the repo cut-off rate and the bank rate." With easy call money rates, prices of government securities are likely to move up by another 10-15 paise.