Short-term government security prices moved up by 3-5 paise on Monday, mainly on expectations that the Reserve Bank of India would fix a lower coupon for the 6- and 10-year papers twin-auction. However, the market saw no interest in long-dated securities. Trades were confined to short-dated securities, dealers said. "The market was dull as traders did not take positions owing to uncertainty in the interest-rate movement. Most players are watching the interest-rate movement in short- and long-term papers," sources said. The 11.55 per cent 2001 paper quoted at Rs 100.03-100.05 (at par on Saturday), 11.78 per cent 2003 paper at Rs 100.05 (par) and 11.68 per cent 2002 at Rs 100.02-Rs 100.05 (Rs 100.02).

FORECAST: Short-term gilt prices are expected to move up by 2-5 paise on Tuesday.

Call Money

The overnight rates opened at 9 per cent on Monday compared with their previous close of 9-9.10 per cent. The call rates ruled at the opening level throughout the morning, but eased in theafternoon to 8.75 per cent owing to absence of borrowers and comfortable liquidity in the system. The rates finally settled at 8.50 per cent towards the close. "Most banks did not borrow from the interbank market as they have already taken positions in the wake of the reporting Friday," sources said.

The Reserve Bank of India mopped up Rs 5,065 crore through three-day 8 per cent fixed-rate repos, a little higher than an inflow of Rs 5,015 crore into the system through repo reversal. On September 11, around Rs 700 crore is expected to come into the system through the interest payment of the 14 per cent 2005 paper and the redemption of the 364-day treasury bills.

FORECAST: The call rates are seen in the 9-9.50 per cent band on Monday.

Spot Dollar

The forex market was stable on Monday. The rupee opened at 42.55/56 against the dollar, unchanged from its previous close. The Indian currency remained at the opening level throughout the morning. "The rupee appreciated during the afternoon to 42.53/54owing to lowered cash remittances and limited cash dollars in the system as New York was closed on Monday," forex dealers said. State Bank of India entered the market late in the afternoon and was seen bidding at 42.53/54. According to dealers, the rupee weakened to 42.56/57 owing to SBI dollar-buying and corporate demand. The rupee finally finished at 42.55/56. During the day, premiums across all maturities fell by a few paise. The Reserve Bank of India reference rate for dollar was Rs 42.55 against the previous close of Rs 42.54.

FORECAST: The rupee is seen between 42.54 and 42.58 on Tuesday.

Forwards Premium

Forward premiums across all maturities fell on Monday compared with their previous closes owing to lack of importer-demand, a stable rupee and comfortable liquidity in the system. Near-term forward premiums fell by 2-3 paise, medium term by 5-7 paise and long term by almost 10-12 paise. The six-month annualised premium quoted at 8.90 per cent, one month (annualised) at 7.90 per cent andthree months (annualised) at 8.64 per cent.

The September premium closed at 15/16 paise (23/26 paise), October at 47/50 paise (60/63 paise), November at 79/80 paise (92/96 paise), December at 111/113 paise (127/130 paise), January at 143/145 paise (161/165 paise), March at 206/209 paise (225/232 paise), April at 240/247 paise (265/270 paise), July at 313/118 paise (381/386 paise) and August at 391/398 paise (415/422 paise).

FORWARD: The six-month annualised forward premium is seen at 8.90-8.97 per cent on Tuesday.