Call rates to remain steady

Call rates ended higher at 6.15-6.3% from around 2%, with the market realigning itself with the LAF rates as the RBI decision to remove the Rs 3,000-crore cap on reverse repo acceptance came into effect. Following the initial increase, call rates held steady around 6.2%. Comfortable liquidity was indicated by the bids received at the LAF auctions, but the auctions also showed a consistent drop in the bids.

At the end of the week, 12 bids for a total Rs 19,625 crore were received for reverse repos, down from 28 bids for Rs 52,070 crore on Monday. The cumulative CBLO volumes for the week rose to Rs 1,68,551 crore from Rs 1,13,137 crore. The overnight weighted average yield was higher at 5.5364% against 0.0820% in the previous week.

The directive over ECBs and hike in MSS ceiling has prompted concern over medium-term liquidity scenario. For the time being, overnight rates are likely to remain steady while gradual pressure could emerge. Liquidity also stands exposed to the risks of bond sales, if any.