Call rates ruled softer on Tuesday. Opening the day at 8.25-8.30 per cent, little changed from its last close at 8.30 per cent, call rates eased to an intra-day low of 8.10 per cent. "The cash market (forex) was open today, and banks were able to generate rupee-funds by selling dollars.

Expectations of cash reserve ratio (CRR) interest inflows also helped. Most borrowers were seen covering for only their minimum CRR balances", a dealer with a US-based bank said. Inflows of around Rs 2,000 crore will come in this week with the Reserve Bank crediting banks' balances with the quarterly interest payment for the April-June quarter. "Trading volumes in the bond market has reduced ever since the Kargil conflict broke out. This has added to the liquidity", dealers said. Most of the deals were struck at 8.25 per cent levels.

The Reserve Bank did not receive any bids at its three-day six per cent fixed-rate repos held today. Elsewhere, the National Stock Exchange pegged its overnight Mibid andMibor at 8.17 per cent (8.28 per cent) and 8.30 per cent (8.44 per cent) with the fortnightly at 8.38 per cent (8.41 per cent) and 8.96 per cent (9.07 per cent) respectively.

FORECAST: Call rates seen at 8.10-8.25 per cent levels on Wednesday.

Spot Dollar

The rupee closed lower at 43.2650/2750. Opening the day at 43.22/24, stronger from its last close at 43.23/25, corporate interest for dollars saw the rupee at 43.275/285 by noon even as importers kept away from the market. "Monday's gains saw a few corporates coming in, but trades were dull. The rupee would have closed stronger, but there was demand for dollars towards close of trades", dealers said, adding: "The market is not clear whether Pakistani Prime Minister Nawaz Sharif will be able to muster support for his deal with the US to pull back from the Indian side of the LoC". Cash/spot quoted at 0.75/1 paise, cash/tom at 0.3750/0.50 paise with tom/spot unchanged at 0.25/0.50 paise.

The Reserve Bank maintained its reference rate forthe dollar at 43.28. Elsewhere, the rupee quoted at 44.19 (44.41) against the Euro in opening trades, went to an intra-day low of 44.24 (44.45) before closing at 44.17 (44.23).

FORECAST: Rupee seen at 43.24 levels on Wednesday.

Forwards Premiums

Forward premiums eased across all maturities on Tuesday. The six-month annualised forward cover ruled unchanged at 4.90 per cent (5.05 per cent) with the one-year at 5.30 per cent (5.52 per cent). "Trades were dull, but premiums came down on scattered receivings. There was receiving interest across most maturities from local banks including the State Bank. Far forwards dropped more by nearly 4-5 paise", a dealer with a brokerage said. August dollars quoted unchanged at 24/26 paise (27/28 paise) with September at 41/43 paise (44/46 paise). February premiums were seen at 138/140 paise (144/146 paise), March at 159/161 paise (167/169 paise) and April at 181/183 paise (189/191 paise).

FORECAST: Six-month annualised forward seen at 4.80-4.90per cent levels on Wednesday.

Gilts

Bond prices moved in a four paise band in intra-day trades, but closed a shade higher on Tuesday. The 11.98 per cent 2004 was dealt unchanged at Rs 102.64 while the re-issued 11.90 per cent 2007 was seen at Rs 101.06/07 (Rs 101.04/05). "There is enough liquidity in the system. Sentiment is turning bullish in the bond markets, and prices could perk up in the days ahead", a dealer with a PD said. The 11.50 per cent 2004 was dealt at Rs 100.76 (Rs 100.74) with the 13.05 per cent 2000 unchanged at Rs 106.63). The 11.75 per cent 2001 paper was dealt at Rs 101.63 (101.56 levels); 11.40 per cent 2000 quoted at Rs 100.81 levels (Rs 100.80-100.85); 11.55 per cent 2001 at Rs 101.25; 11.68 per cent 2002 at Rs 101.69 with the 12.50 per cent 2004 at Rs 104.35.

FORECAST: Bond prices may gain a shade on Wednesday.