Mumbai, June 1: The interbank call rate stayed around 4.5-5.5 per cent levels during the first three days of the week that started on May 26 but firmed later and stayed at those levels during the rest of the week.

The firm call trend during the latter part of the week was on account of a three-year government bond auction that soaked Rs 3,000 crore in liquidity from the system.

The call rate opened higher at 7.5-8 per cent on Thursday when banks made payment toward the bonds that were auctioned Wednesday. The call rate began declining since Friday and settled around six per cent levels on Saturday.

The call rate is seen declining this week. Dealers expect the call rate to move in a 4-5 per cent band because liquidity through the Reserve Bank of India is seen keeping the rates lower.

The RBI has been buying dollars in the foreign exchange market and injecting rupee funds during the week under review. Dealers expect the RBI to continue intervening in the forex market and induce rupee funds into the money market to keep domestic interest (overnight) rates low.

In the securities market, the new bonds auctioned on Wednesday at 12.14 per cent evoked good buying interests in the secondary bond market. On Thursday, the National Stock Exchange registered trades worth Rs 909 crore in government bonds alone. Of this, Rs 615 crore accounted for the new 12.14 per cent, bonds alone.

Most deals in the new bonds were traded at par (Rs 100). This was because many banks routed their transactions through primary market dealers (PDs) instead of bidding at the auction.

PDs offered banks the new bonds at RBI's cut-off rate provided they don't bid at the auction and route their offers through them. PDs offered such an option because they wanted to increase their turnover and get the benefit of the incentive offered by the RBI.

PDs are entitled to Re 1 on every bonds they get or take on them as devolvements, but from this month, the RBI has changed the rules and PDs will now have to bid competitively for such incentives. On Friday, the new bonds appreciated as banks began taking trading positions. Prices in the 12.14 per cent bonds touched a high of Rs 100.11 on Saturday.Most of the near and medium-term bonds also saw a mild appreciation in prices because of the new bonds.

These bonds which were being traded around 12.25-12.30 per cent yields began aligning with the new 12.14 per cent bonds.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.