Prices of long-term government securities jumped by 20-25 paise today, while call rates hovered around 6.50-6.65 per cent as the liquidity situation continued to remain easy.
Government security prices looked up 30-35 paise in the morning and slipped later by 15-20 paise on profit-booking by a few market participants.
A primary dealer said: "As prices rallied quite a bit during the last couple of days, dealers were concerned about the high levels. This led to profit-booking in later hours."
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He added that a section of the market was expecting an open market auction announcement from the Reserve Bank of India (RBI).
Call rates remained slightly above the refinance rate of 6.50 per cent in the morning but came down later as the demand for overnight money became thinner.
A dealer with a private sector bank said: "There are few banks which were short of liquidity and hence the demand was low since the morning. As more and more banks covered their positions, the demand for overnight money came down further."
RBI today received five bids worth Rs 7,305 crore at its one-day repo auction. All the bids were accepted at a cut-off rate of 6.50 per cent.
According to dealers, as there were not much demand in the call market, liquidity-surplus banks put money in the repo auction. There were no bids at the one-day reverse repo auction.
Government security prices are likely to go up tomorrow due to a comfortable liquidity condition, though there can be profit-booking at higher levels. The easy liquidity situation will help call rates to move around the refinance rates of 6.50 per cent as well.
Dealers said most of the banks have already covered their cash reserve ratio requirements for the fortnight already and hence the demand for overnight money will be low tomorrow.