Govt Papers May Witness Mild Rally

The government security prices are likely stage mild rally driven by the easy liquidity in the banking system. Dealers said the trading will be concentrated in the papers of 5-10 year maturity.

A dealer with a foreign bank said, "The prices of the long-term securities are already high. So, the action will be mainly at the medium end of the market, which are likely to go up."

Dealers expect the yield of 10-year paper to remain in a range of 7.30 per cent to 7.35 per cent. However, some dealers are expecting that the Reserve Bank of India (RBI) may conduct open-market operation, which can hamper the sentiment of the government security market.

A dealer with a private sector bank said, "The expectations of an open-market auction will itself check the the rally in government security market. We do not see prices to go up more than 40-45 paise across all maturity."

On Saturday, last week, the government security prices were up by 15-20 paise. Dealers said the rally was due to ample liquidity in the market, and also because of absence of any negative news.