Governments security prices came down by 15-20 paise at the medium and long end of the market today. Call rates continued to remain soft around 6.50-6.75 per cent.
Government security prices opened marginally higher and remained stable for a couple of hours. But in the afternoon prices started slipping and dipped below the yesterday's closing level.
A primary dealer said, "A mutual fund was selling in the market to meet its redemption pressure which pushed down the prices." Dealers, however, said that the market participants have taken a cautious approach ahead of the budget announcement on February 28.
In the call money market, rates opened in the 6.50-6.65 per cent range. The rates went up later to close around 6.60-6.75 per cent.
A dealer with a public sector bank said, "There was a little demand pressure from some banks who have not covered their cash reserve requirement adequately. However, there was enough liquidity in the market to contain overnight rates below 6.75 per cent level."
There were eight bids of Rs 4,390 crore in the one-day repo auction. All the bids were accepted at a cut-off rate of 6.50 per cent. There was no bid in the one-day reverse repo auction.
Trading will remain subdued in the government security market tomorrow. Treasury chief of a new private sector bank said, "The market is waiting for the budget announcements. Nobody wants to build a huge position at this moment because if the expectation of a cut in small savings rate is not realised, there will be sharp fall in prices." In the call money market, ample liquidity will keep call rates in a range of 6.50-6.75 per cent.
