Gilt May Be Around Rbi Omo Rates

The prices of government securities are likely to remain range-bound and will trade around the higher purchase prices being offered by the Reserve Bank of India through its open market operations (OMO).

However, if the US-Afghan row turns into a full-scale war, the prices of long-term securities could take a knock by three to four rupees.

With the half-yearly closing approaching, the banks will make an attempt to bid up the market to improve the valuations of their statutory liquidity ratio (SLR) securities portfolio.

A dealer with a private sector bank said, "The current levels in the prices of government securities are mainly because of the prop up given by the RBI by purchasing them at higher prices. Players will book profits at every point of price-rise."

The central bank, between September 18 and September 21, had purchased securities of various maturities through OMO window and injected Rs 3,857 crore into the system. The RBI took the decision after the prices touched new lows on September 17.

The benchmark 11.50 per cent 2011 (10-year) paper was dealt as low as Rs 109, down by Rs 6.25 from the levels prevailing before the terrorist attacks on the US.

Last week, on Saturday the yield of this paper was pegged at 9.48 per cent, while the inter-week yield shot up from 9.06 per cent to 9.88 per cent in the aftermath the terrorist attacks. Market players expect it to hover in the range of 9.25 per cent to 9.75 per cent this week.

"If the US attacks Afghanistan, the prices of long-term securities could fall by Rs 3 to Rs 4 and then recoup after a couple of days," a dealer said.