Auction Outflow Unlikely To Hit Gilts

Sentiment in the government security market will continue to remain upbeat despite the Rs 6,000 crore auction outflow during the week. Money market dealers expect the prices to move up by 25-30 paise at the medium and long end of the market.

A dealer said: "Rs 6,000 crore is too small an amount to hamper the market liquidity. However, both the auctions will give a feel of what the appropriate yield should be. We expect the market to remain quiet in the first half of the week and to rally after that." Dealers, however, expect the yield of 10-year paper -- presently around 8.60 per cent -- to touch 8.55 per cent by the weekend.

The treasury head of a private sector bank said the rally will be gradual as the prices are already at very high levels. He said: "Prices across all maturities are at their all-time high and so the market is concerned a bit. We expect some amount of profit-booking at the end of the week."

Government security prices were marginally up, driven by the liquidity in the system. A primary dealer said: Trading volume was low on Saturday. But prices went up by 10-15 paise at the medium and long end of the market."