Overnight rates held firm on Monday. Opening the day at 10.25-10.50 per cent from its weekend's close at 9.75-10 per cent, call rates hovered above 10 per cent levels on good demand for funds. "Lenders were seen shying away in early morning deals, but the State Bank of India spot-dollar purchases helped ease liquidity", a dealer with a Gulf-based bank said. Call rates went to an intra-day high of 10.50 per cent before easing to close at 9.50-9.75 per cent. Most of the deals were done at 10-10.10 per cent thereabouts. The Reserve Bank of India announced the auction of 364-day T-bills for a notified amount of Rs 500 crore on Wednesday and of 91-day T-bills for a notified amount of Rs 100 crore on Friday. Elsewhere, the National Stock Exchange's overnight Mibid and Mibid rates were pegged at 9.93 per cent and 10.20 per cent with the 14-day ones at 9.27 per cent and 10.07 per cent respectively.

FORECAST: Call rates seen at 9.75-10.25 per cent levels on Tuesday.

SpotDollar

The rupee held firm against the dollar at 42.74 levels on Monday in quite trades. Opening the day at 42.7350/7450 from its last close at 42.7450/7550, the rupee was gained to 42.73/7350 by noon with dollar supplies matching demand. "Corporate interest for dollar was poor.

The rupee held firm despite the State Bank of India dollar purchases. State Bank was seen bidding for dollar from 42.73 to 42.74 levels", dealers said. At close, the rupee was seen at 42.7275 levels. Cash/spot went at 1/1.25 paise (1.75/2 paise) with cash/tom unchanged at 0.50/0.62 paise and tom/spot at 0.50/0.62 paise (0.25/0.50 paise). The Reserve Bank of India pegged its reference rate for the dollar at 42.74 against its previous fix of 42.76.

Elsewhere, the Euro opened at 45.46 against the rupee, went to an intra-day high of 45.64 before closing at 45.56.

FORECAST: Rupee seen holding 42.72/74 levels on Tuesday.

Forward Premiums

Forward premiums quoted mostly unchanged on Monday. The six-monthannualised forward cover was seen unchanged at 5.50 per cent. "Forward are holding firm in line with the spot rupee. The State Bank of India was seen both receiving and paying small amounts", dealers said.

June dollars were seen at 22/23 paise (23/24 paise) with July at 42/43 paise (43/44 paise) and August at 63/64 paise (64/65 paise) while in the far forwards, December dollars went at 147/149 paise (149/150 paise) with January at 174/176 paise (177/178 paise).

"Activity in the forwards remained dull and forwards drifted lower slightly in the absence of paying pressure and scattered receiving...premiums will hold current levels as long as call rates are at 10 per cent thereabouts", a dealer with a brokerage said.

FORECAST: Six-month annualised forward cover seen at 5.60-5.65 per cent levels on Tuesday.

Gilts

Bond prices went higher on Monday. Active trades were seen in the 11.75 per cent 2000 and the 12.50 per cent 2004. "Bond prices gained as call rates came off from its 10.50 percent levels soon", a bond dealers with a PD said. The 11.75 per cent 2001 was dealt at Rs 101.66-101.68 (Rs 101.60-101.6) with the 12.50 per cent 2004 at Rs 104.40-104.43 (104.36-101.42). Few trades were seen in the 11.64 per cent 2000 and the 11.19 per cent 2005 papers. Trading interest was also seen in the 11.40 per cent 2000 paper at Rs 100.86-100.89 (100.84-100.88) with the 11.55 per cent 2001 quoting wide between Rs 101.23-101.29. The 11.68 per cent 2006 was seen at Rs 100.94-100.9 levels. The long-dated 12.40 per cent 2013 paper was dealt at Rs 101.24-101.26 (101.23-101.24). The 364-day T-bill maturing on the 28 of January 2000 went at YTM 9.75-9.80 per cent.

FORECAST: Bond prices to hold current level on Tuesday;may gain slightly if call eases to below 10 per cent.

Compiled by Raghu Mohan