MONEY MARKET REPORT
Call money rates tightened marginally yesterday, while government security prices fell ahead of the auction of Rs 5,000 crore worth of gilts.
Security prices remained in a narrow range following the announcement of the auction results which were widely expected by the market.
Also Read
Call rates opened lower but crept up gradually during the day upto 7.25 per cent levels as the traditional lenders in the call money markets - the large nationalised banks reduced lending.
"The big nationalised banks such as the State Bank of India were not lending the normal level of funds and this caused the call rates to move up," said a dealer with a private bank.
Overnights ranged between 7.10-7.25 per cent with most deals conducted between 7.10-7.20 per cent.
They are expected to tighten today due to the large outflows on account of the auction. They are expected in a range of 7.50-7.75 per cent.
Security prices also remained lacklustre ahead of the auction with some amount of selling by primary dealers who were believed to offloading securities to make way for the auction. Trading was done mostly in the medium-term maturities.
Following the announcement of the results of the auction, both securities in the market were traded at just one paise above their respective cut-off prices.
"The cut-off prices were along expected lines and there was little reaction in the market to the news," said a primary dealer.
Both auctions had been widely expected to go through without devolvement as there is strong appetite right now for short term paper.