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Call rates to inch up, bonds likely to be rangebound

Written by: Staff

Mumbai, May 14 (UNI) Call rates hovered in the range of the reverse repo rate of 5.50 to 5.60 per cent last week due to surplus liquidity in the money market.

In the daily reverse repo auctions, the Reserve Bank of India absorbed money in the range of Rs 45,000 to 70,000 crore during the week.

''Call rates are expected to rise next week. However, they are likely to trade in a soft range on strong liquidity support,'' said a report from Credence Analytics.

Govt Bond prices moved south due to hike in the US interest rate by the Federal Reserve on Wednesday.

Furthermore, a spike in oil prices with Brent holding above USD 73 a barrel dampened the mood.

Concerns about higher inflation and higher interest rates led to lower presence of traders in the bond market, said an analyst.

Impending rise in domestic fuel prices led to further rise in the yields. The yield on the actively traded 7.59 per cent 2016 bond rose to 7.55 per cent on Friday from 7.53 per cent in the previous week.

Fresh bond issue for Rs 5,000 crore scheduled between May 16-24 was likely to keep trading in gilts low, the analyst added.

''Bond prices are likely to trade in a range due to uncertainty over interest rates. Crude oil prices too will be of concern for the bond market,'' said a forecast by Credence Analytics.


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