Gilt Prices Likely To Be Ranged

Government security prices are likely remain rangebound this week on the back of comfortable liquidity. Dealers feel prices should move in a 15-30 paise range. "There is no problem with the liquidity in the system and, as there is no possibility of an auction during the week," a dealer said.

Dealers do not see prices going up much as the rates have already peaked. The treasury head of a private sector bank said: "Prices are too high and yields are too low now. In such a situation, any bad news can push down prices drastically and, hence, market participants are afraid of taking any fresh positions."

Gilt prices went up by 5-10 paise for papers at the long end of the market. Dealers attributed the rise in prices to low call money rates and ample liquidity in the system.

Liquidity in the market will get a boost with the inflow of Rs 8,000 crore on account of the redemption of the 11.75 per cent 2001 paper on August 25.

With no possibility of an auction announcement due to the Rs 9350 crore dividend received by the central government from the Reserve Bank of India, dealers feel there may be a slight rally in gilt prices. They added that there may be slight rise in security prices if the Federal Open Market Committee announces a rate-cut on August 21.