Call rates ruled marginally softer on Tuesday. Opening the day at 8-8.10 per cent, almost unchanged from its last close, dull trades saw overnight rates rule at 8.05 levels for most of the day. "There appears to be enough liquidity in the system to take care of the demand. Most banks have covered for their cash reserve ratio requiremernts ahead of the Reporting Friday", a a dealer with a European bank said. By close of trades, call rates were seen at 7.90-8 per cent.

Most of the trades were struck at 8.00-8.05 per cent levels. "Call rates could firm up by the close of the fortnight. The Reserve Bank's move to re-issue the 11.90 per cent 2007 for Rs 2,500 crore will soak up much of the Rs 2,800 crore in inflows due this fortnight by way of coupon payments on dated securities, and redemptions of T-bills if the auction sails through", money market dealers opined.

The Reserve Bank did not receive any bids to 6 per cent four-day fixed rate repos held today. Elsewhere, the NationalStock Exchange pegged its overnight Mibid and Mibor at 7.99 per cent (8.02 per cent) and 8.10 per cent (8.14 per cent) with the fortnightly ones at 8.48 per cent (8.40 per cent) and 9.13 per cent (9.12 per cent).

FORECAST: Call rates may firm up to 8.25 per cent on Wednesday.

Spot Dollar

The rupee held firm against the dollar on Tuesday and closed at 43.3625/37.

Opening the day at 43.36/38, the rupee traded in a fine two paise band throughtout the day on poor corporate interest for dollars. "The rupee hovered at 43.3550/3650 till mid-session trades. Most of the big corporates stayed away", a dealer with a brokerage said. Cash/spot quoted at 1/1.25 paise (0.3750/0.6250 paise).

There were no cash/tom and tom/spot with the Reserve Bank remaining closed on Wednesday for its book closure. "Trades are lacklustre as there was no market moving factors. The Kargil issue, as it stands, has alreday been discounted by the market", dealers opined. The Reserve Bank maintained its reference rate for thedollar at 43.36. Meanwhile, the rupee quoted at 44.70 (45.05) against the Euro in opening trades, went to an intra-day low of 44.95 (45.24) before closing at 44.92 (45.01).

FORECAST: Rupee seen between 43.35 and 43.39 on Tuesday.

Forwards Premiums

Forward premiums held firm against the dollar. The six-month annualised forward cover quoted unchanged at 5.35 per cent. "There are hardly any trades happening. Interest for forward dollars is poor. There was only a little of scattered receiving", a dealer with a brokerage said.

August dollars quoted unchanged at 36/38 paise with September at 56/58 paise (57/58 paise). February premiums were seen at 168/170 paise (169/171 paise), March at 194/196 paise (194/196 paise) and April at 210/222 paise (220/222 paise). "A few state-run banks were seen receiving small amounts, but there is little paying interest as the spot-rupee is holding firm for the last few days", a dealer with a US-based bank said.

FORECAST: Six-month annualised forward cover seen at5.34-5.36 per cent levels on Wednesday.

Gilts

Gilts prices fell across the board of Tuesday after the Reserve Bank's announcement that it will re-issue the 11.90 per cent 2007 for Rs 2,500 crore on July 1. The 12.32 per cent 2011 paper was dealt at Rs 101.88 (Rs 102.00/01) with the 12.40 per cent 2013 at Rs 106.55 (Rs 106.85). The medium-term 11.98 per cent 2004 paper was dealt at Rs 102.30 (Rs 102.42) while the 13.05 per cent 2007 was seen going at Rs 101.40 levels (Rs 101.50). "Sentiment on the whole is bearish in the bond market because of the Kargil issue.

The Reserve Bank's announcement that it will re-issue the 11.90 per cent 2007 for Rs 2,500 crore late on Monday evening saw primary dealers off-load securities to make room. Inflows of nearly Rs 2,800 crore due this fortnight by way of coupon payments on dated securities, and redemptions of T-bills, will be soaked up if the auction sails through. A few private-sector banks also sold heavily", a dealer with a primary dealership said. At theshort-end, the 11.40 per cent 2000 paper quoted at Rs 100.71 (Rs 100.74 levels) with the 11.75 per cent 2001 paper at Rs 101.40 (Rs 101.60).

FORECAST: Bond prices seen holding current levels on Wednesday, but call rates hold key.