The prices of medium-and long-term government securities declined by 10-15 paise amid volatile but thin trading today, while the call money rates closed around the refinance rate of 6.50 per cent after breaching 8 per cent level in some morning trades.
Security prices opened lower and went down by 35-40 paise. However, they recovered later and ended 15-20 paise lower than the yesterday's closing.
A primary dealer said, "The market continued to remain concerned about the border tensions and most of the players were not trading actively. As the prices fell too much, support came from the public sector banks, which helped the prices to bounce back."
Also Read
Another dealer said the liquidity condition was good and would be further easy during the next fortnight with the second round of CRR-cut coming into effect on Saturday.
In the call money market, the rates opened in the range of 7.50 cent to 8 per cent and went up to 8.25 per cent as some big lenders were absent. The rates, however, came down to close in the range of 6.40 per cent to 6.60 per cent.
A dealer with a private sector bank said, "The demand for overnight money was high in the morning as some banks rushed for liquidity to cover their CRR requirements and also some big lenders were absent. But by afternoon, the lenders came back and the demand petered off."
There were no bids for the Reserve Bank of India's one-day repo and reverse repo auctions.
The trading in the government securities market is likely to remain thin with volatile prices as the border tension is unlikely to be over shortly. Dealers are expecting the prices to dip by another 15-20 paise tomorrow.
Call money rates are likely to remain below 7 per cent because of low demand as most of the banks will covered their CRR requirements.