Moderate rally seen

GOVERMENT SECURITIES

Valuation concerns in the new financial year may result in a moderate rally in the prices of government securities. Another trigger would be the movement of yields in the US after latest data showed that the country's trade deficit widened to a higher than expected $58.3 billion.

While a section of the market feels that the data weaken the economic recovery story as the export demand is failing to catch up with rising imports, some view the rising imports as a sign of the strengthening economic activity.

If the US yields take a beating in response to the data, this will be a trigger for the domestic gilts market for a rally in prices. In this backdrop, the yield on the benchmark 7.38 per cent 2015 paper is expected to rule in a range of 6.53-56 per cent.

Recap: Gilt prices remained range-bound last week due to lack of triggers. And excess liquidity meant the on-tap sale of state government papers went through sans a hitch.