Price Rally To Continue

Government security prices are likely go up by 35-40 paise across all maturities this week on the back of the easy liquidity situation and soft call money rates.

Dealers expect another round of Fed rate cut on June 27 at the Federal Open Market Committee meeting, which will result in a dip in government security yields.

Government security prices went up by 10-15 paise on Saturday as call rates remained soft around seven per cent. A dealer said, "The sentiment in the market remained bullish, but as on Saturday activity are generally less in the money market, the gain was only marginal."

The liquidity situation in the current week will be improved further on account of redemption of government securities worth Rs 5,700 crore and by deposit mobilisation.

A dealer said, "Deposit mobiliastion has been outstanding in recent times. It would remain so as people are believed to withdraw money from the stock market and deposit with banks."

Dealers feel that there may not be any auction this week as well. The treasury head at a private sector bank said, "Though the ways and means advances figure is quite high for the week needed on June 15, one should remember that the Reserve Bank of India has privately placed Rs 4,000 of government papers with the central government."

A section of dealers feel that there may be a shift of attention to the medium and short-term securities as the long-term segment of the market is overcrowded.