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Call rates may remain in single digits: I-Sec

Our Bureau

CHENNAI, Nov. 20

CALL rates are expected to remain in single digits this week after ruling at over 10 per cent for the last two weeks, ICICI Securities (I-Sec) said in its weekly update on fixed income securities.

Liquidity was expected to remain comfortable as IMD inflows besides coupon and redemption inflows totalling around Rs 2,300 crore over the week are expected to continue.

Cut-off yields at treasury bill auctions continued to fall. At the 14-day and 91-day T-bill auctions last week, cut off yields fell to 8.37 per cent and 8.98 per cent respectively. The 91-day T-bill devolved on the RBI to the tune of Rs.4.5 crore.

The 365 day T-bill cut off at a yield of 10.15 per cent. With secondary market trades also reported around these levels, the spread of 364 day T-bill over the bank rate had narrowed to 215 basis points. This was the narrowest spread since the bank rate h ike in July and was only a few basis points higher than its lowest level this fiscal, the report said.

Ways and Means Advances (WMA) to the Union Government stood at Rs 6,059 crore for the week ended November 10. Adjusting for coupon payments over the period November 11-24 and for gilt issuances since November 11, I-Sec estimates the WMA balance for the w eek ending 24th November to be around Rs 5,700 crore.

It said that the demand for market funds was, therefore, likely to build up only towards the month-end. However, the RBI could take advantage of the current bullish sentiment and flush liquidity to conduct gilt auctions or open market sales.

Over the last week, yields at the short-to-medium end of the yield curve fell by around 5 basis points while those at the long-end rose slightly, rendering a steeper yield curve. The upside was. however, likely to be capped by OMOs, I-Sec said.