The Hindu Business Line : Liquidity fears keep bonds range-bound

MUMBAI: Bond prices moved in a tight 10-15 paise band in a lacklustre Government securities market on Wednesday amid continued fears of a liquidity crunch.

Call rates surged high to 5.25 per cent in the inter-bank market amid heavy borrowing by banks in need of funds, possibly wanting to fulfil CRR requirements and other commitments, said dealers.

They added that most market players in the Government securities market were concerned about the liquidity situation and were abstaining from building huge positions, as the State loan auctions were still on.

"There is another auction scheduled anytime between November 8 and 9, and that is another reason that players want to proceed with caution. In the current scenario, there are no positive factors to drive the market activity is subdued," said a dealer.

The 7.38 per cent 2015 paper traded between Rs 103.15 and Rs 103.28 compared to its closing levels of Rs 103.20 yesterday.

"The overall sentiment in the bond market is down. We are entering a new cycle of interest rates moving up. So, no one wants to build positions," said the Treasury Head of a public sector bank.

In the one-day reverse repo under LAF, the Reserve Bank of India (RBI) received and accepted four bids amounting to Rs 510 crore at the rate of 4.75 per cent.

The CBLO market saw 156 trades for volumes of Rs 5,115 crore in the rate range of 5-5.5 per cent..