Clutch Of Factors To Determine Course

Inflation numbers, budget expectations, and the stand that the US-UK axis takes vis-a-vis Iraq, will determine the trading sentiment in the government securities market.

Though prices of gilts ended up on the last trading day of the previous week as UN chief weapons inspector Hans Blix and the International Atomic Energy Agency chief Mohammed El Baradei, in a report to the UN Security Council, indicated that they had not found any egregious Iraqi violations of its commitments to forsake weapons of mass destruction, the decision of the US to go it alone and attack Iraq could vitiate sentiment.

The trend in gilts turned positive on Saturday as Iraqi president Saddam Hussein issued a decree banning import/manufacture of weapons of mass destruction.

And call money ruled easy in the 5.25-5.50 per cent band. Liquidity this week will be just about comfortable, but it will not be enough to induce a rally in gilts.

Surplus liquidity in the market is estimated at around Rs 1,000 crore only.

If the sentiment improves, the benchmark 10-year gilt could break the resistance yield of 6.50 per cent and touch 6.25 per cent levels.

If there