Auction Expected To Stabilise Securities

Government security prices will remain stable this week on the back of another expected open market auction. Dealers said though the sentiment would remain positive they did not expect major rally during the week.

According to a dealer, there was no problem with liquidity. "The market is fluid enough to absorb another Rs 6,000 crore worth auction. However, as the open market auction signals the Reserve Bank of India's (RBI) discomfort with the current low level of yields, market participants will remain cautious," he said. The 10-year paper yield, which is at present around 7.80 per cent, is likely to hover in the 7.75-7.80 per cent band this week.

 

The treasury head of a private sector bank said that there may be a slight shift of rally from the medium and long term segment to the securities with short term maturity.

"For the past one month, the rally mainly concentrated at the medium and long end of the market. With the expected open market auction, the rally is likely to stop. But since the liquidity condition will remain comfortable, we expect prices at the short end of the market to rise," a senior dealer with a public sector bank said. The government security market was quiet on Saturday with prices hovering around the same level as on Thursday and trading volume remaining quite low.