Liquidity in the system had improved after the first phase of the one percentage point CRR saw inflows worth Rs 3,600 crore on Saturday. There was some demand for funds in the morning which was usual. "The three holidays during the week added to the demand for funds. But supplies took care of demand," a primary dealer said. Call rates closed at 6.85-7.0. Dealers said they were not too concerned about outflows towards the 12.29 per cent 2010 bond auction for Rs 5,000 crore on April 11. The auction amount was below market expectations and dealers said liquidity in the system was sufficient to take care of the outflows.
FORECAST: Call rates seen around 7 per cent levels on Tuesday.

Spot dollar
The rupee ended slightly firm against the dollar on Monday amid heavy dollar supplies. The rupee opened at 43.62/6250 as compared to Friday's close of 43.62/6225. Dealers said there was some dollar sales from some foreign banks, while demand came mainly from state-run banks.

"In the afternoon, it was mostly dull trading," a forex brokerage dealer said. The rupee ended at 43.61/6125. Cash/spot ended at 0.375/0.50 paise, cash/tom at 0.00/0.25 paise and tom/spot at 0.25/0.50 paise. The RBI fixed its reference rate for the US dollar at 43.61 from the previous 43.62. "In afternoon trades, there was the usual remittances from the Gulf coupled with some export inflows," a dealer with a forex brokerage said. Dealers said the State Bank of India (SBI) and some other state-run banks were bidding towards the close, which arrested the rupee from firming further.
FORECAST: The rupee seen steady on Tuesday.

Forward premiums
Forward premiums ended steady and dealers said near-term premiums had a soft bias while trading in the longer maturities was lacklustre. The six-month premium ended unchanged at an annualised 2.75%. Dealers said the premiums were tracking steady call rates throughout the session. Call money rates ended slightly lower at 6.85-7 %t, little changed from the previous close of 6.90-7%.

"There was some receiving in the near-term," a dealer with a state-run bank said. "Activity for the three and six-month maturities was moderate, otherwise the forward section remained dull," a foreign bank dealer said.

Dealers said premiums may firm after outflows towards payment by banks for the 12.29 % 2010 bond of Rs 5,000 crore this week. April dollars ended at 3/4 paise, May at 12/13 paise, while in the far end October ended at 65/66 paise and November at 77/78 paise.

FORECAST: Premiums seen slightly higher on Tuesday

Gilts
Government securities ended higher amid sustained buying ahead of Tuesday's auction. Most were building positions in anticipation of a good response to the auction, dealers said. The RBI will auction the 12.29 per cent 2010 bonds worth Rs 5,000 crore on Tuesday, the first of the government's borrowing through dated securities for the year. Dealers said the rally had been spurred by the low auction amount also.

The market had been expecting the government to mop up around Rs 10,000 crore amid the easy liquidity following the first phase of the cash reserve ratio (CRR) cut, effective from Saturday and other coupon flows. The 11.99 per cent 2009 bond was ended at Rs 110.05 compared with Saturday's Rs 109.65. The 12.29 per cent 2010 bond, to be re-issued on Tuesday, was traded at Rs 111.95, up 15 paise, since the morning.

FORECAST: Bond prices seen range-bound on Tuesday.

-- (Compiled by Anurag Joshi)