Dull trades were seen in the overnight rates on Monday. Opening the day at 10-10.15 per cent, a shade higher from its weekend's close at 10-10.5 per cent, call rates ruled at these levels for most of the day on poor demand for funds. "Call rates are ruling at these levels largely on account of the fact that a few primary dealers are yet to repay their additional refinance of 10 availed of from the Reserve Bank", a dealer with a US-based bank said. Call rates have ruled softer after the Reserve Bank placed seventeen 364-day T-bills on its open market operation window. Sentiment has also improved following the decision to privately place the 12.29 per cent 2010 for Rs 3,500 crore. Inflows during the new current fortnight are estimated at Rs 1,900 crore, and this is not seen cooling rates further. "Only a cash reserve ratio cut can ease call rates", a dealer said. At close, call rates were seen at 9.90-10 per cent. Most of the deals today were struck at 10 per cent levels. The DFHI extended the market support tothe tune of Rs 1,500 crore. The NSE pegged its reference rate for the overnight Mibid and Mibor at 9.89 per cent and 10.08 per cent.

FORECAST: Call rates seen at 10.10 per cent levels on Tuesday.

SPOT DOLLAR

The rupee held firm against the dollar on Monday. Opening the day at 43.39/40, poor corporate demand for dollars saw the rupee hold these levels for most of the day. "The rupee's movement was restricted to a two paise band... there are no market moving factors, and corporate interest for dollars is also poor", a dealer with a brokerage said. At close of trades, the rupee was seen at 43.38/39. Cash/tom quoted 0.50/0.75 paise (2/2.25 paise), cash/spot at 1.25/1.50 paise (2.50/2.75 aise) with tom/spot unchanged at 0.50/0.75 paise. The Reserve Bank pegged its reference rate for the dollar at 43.39 as against its previous 43.42. Elsewhere, the Euro opened the day at 46.80 (46.59) against the rupee, went to an intra-day high of 46.94 (46.87) before closing at 46.57 (46.75).

FORECAST: Rupee seen at 43.3950/41 levels on Tuesday.

FORWARD PREMIUMS

Premiums held stable on Friday. The six-month annualised forward premium was quoted at 5.43 per cent. "There was hardly any demand for forward dollars... the absence of any importer bookings, expected to start in a day or two for customary month end remittances, also helped premium stable", a dealer with a brokerage said. October premiums finished 1/2 paise (2/3 paise) with April at 119/121 paise (122/124 paise) and May at 139/141 paise (142/144 paise). The placement of seventeen 364-day T-Bills on the Reserve Bank's open market window has lowered call rates, and premiums have been softer since. "Premiums tracked call rates today... this trend will hold until after the credit policy. Most expect premiums to decline as their is a strong feeling that the Reserve Bank will announce a cash reserve ratio (CRR) cut", a dealer with a European bank said.

FORECAST: Six-month annnualised forward cover seen at 5.4 per cent levels on Tuesday.

GILTS

Bond prices quoted a shade higher across all maturities on Monday. "There is a strong feeling that the Reserve Bank will announce a cash reserve ratio (CRR) cut in its upcoming credit policy", a dealer with a primary dealership said, adding: "bond prices rose in early trades, but came off a bit towards close". The 11.90 per cent 2007 was dealt at Rs 102.90-102.95 (102.88); 11.99 per cent 2009 at Rs 102.60-102.62 (Rs 103.58) and the 12.32 per cent 2011 finished at Rs 103.60-103.64 (Rs 103.57 levels). Bond prices have gone higher ever after the the Reserve Bank's decision to privately place the 12.29 per cent 2010 for Rs 3,500 crore today, allaying fears of any tightening in liquidity in the near term", a dealer with a primary dealership said. The 12.60 per cent 2018 was seen at Rs 104.34-104.36 with the 12.40 per cent 2018 at Rs 103.62-103.64 levels.

FORECAST: Gilt prices seen gaining in intra-day trades on Tuesday.

Compiled by Raghu Mohan