MONEY MARKET REPORT
The prices of long-dated gilts fell by nearly 100 paise, while short- and medium-dated securities slipped by 40 to 50 paise yesterday.
Call money rates, on the other hand, ruled static between 8 and 8.10 per cent. Dealers said that the fall in gilts was primarily due weakening of the rupee against the dollar. In addition to this, they said sentiment is poor now due to uncertainty on the interest rate movement and advance tax outflows. Gilt prices opened at the previous day's trading level and subsequently saw a steep fall.
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Dealers said despite some shortage of liquidity felt by banks, call money is expected to be stable in the range of 8 to 8.15 per cent and at most it could touch 8.25 per cent.
But dealers were not quite sure about the movement in the securities. "The price is expected to be nervous ahead of any further depreciation in the rupee. In case the rupee depreciates further, gilts too may fall further," said a dealer.
Moreover, an inflow of Rs 3,184 crore is expected on account of 12.14 per cent security on May 29. This, in turn, has made the market jittery.
The participants expect the Reserve Bank of India to announce an auction subsequently in order to suck out the liquidity from the system and also ensure the success of the Centre's borrowing programme.
"However, the market has lost the appetite for the government securities as most banks have over brought securities and are only keen to offload at the right price," said a treasurer from a private bank.