Call rates opened around 14-14.25 per cent and went up to 14.5 per cent because of shortage of funds. However, rates fell after the Reserve Bank of India conducted the repo auction.
"Banks were holding funds in the morning hours to invest in the repo auction," said a dealer. This caused some shortage of funds in the first few hours. "Once the repo auction was over, funds from those players which was not accepted was invested in markets, bringing down the rates to 13.5 per cent," added a dealer.
The RBI mopped up Rs 3,340 crore through the two-day and four-day repo auctions. The apex bank mopped up Rs 1,075 crore through the one-day repo at a cut-off rate of 14.50 per cent and Rs 2,265 crore through the four-day repo at a cut-off rate 15 per cent.
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Prices of government securities moved down by 10-15 paise in the morning. After the apex bank announced the instruction to the corporates to bring back 50 per cent of their holding in the exchange earner's foreign currency account (EEFC), prices moved sharply.
"After RBI announced the instructions on EEFC account, prices moved up by 35-40 paise," said a primary dealer. Total traded volume in the government securities market was Rs 870 crore.
Dealers expect call money rates to be stable at 13-14 per cent, while prices of government securities are likely to be range-bound on Wednesday.
"The repo rate is not expected to fall further," said a dealer with a private sector bank. "It seems that along with their recent measures regarding the EEFC account, they would continue with a high repo rate to keep the volatility in the forex market low," he added.