The overhang is bearish

OUTLOOK: Government securities

"The announcement by the Union petroleum minister that retail oil prices may be hiked has added to concerns on inflation," said a dealer.

Rising US yields and the apprehension that it might affect the flow of foreign exchange into India is another dampener. This is because capital inflows have been the major source of liquidity for the market for some time now. A dealer with a public sector bank said he is not impressed by the current surplus liquidity of Rs 31,000 crore.

"The current fiscal should witness further pick-up in credit offtake, which would be accompanied by a huge supply of government papers as part of the Centre's borrowing programme. This could impact liquidity," he said.

However, market activity is expected before the Reserve Bank of India's annual policy statement on April 28. Traders would like to offload their positions or buy more depending upon the outlook of the policy pronouncements. In the context, the ten-year benchmark is expected to rule in the range of 7.05/15 per cent this week.

Recap: The governement securities market witnessed some activity last week after the 8.07 per cent 2012 paper auction saw a cut-off yield of 6.48 per cent. However the buying demand was restricted among traders.