Demand Seen For Medium-Term Offerings

The government securities market will see buying interest in bonds in the medium segment (papers with two to eight years of residual maturity) this week as there is an oversupply of the long-dated (with eight to 14 years residual maturity) paper.

Players feel that securities at the medium end could appreciate by as much as 15 to 20 paise.

Dealers are expecting the majority of the trades across the gilt maturity spectrum to be 'carry-trades', implying that prices will rule stable with little or almost no dips.

"This stability will be due to the ample liquidity in the system. Bond prices across the board could move 5 to 10 paise on either side of Saturday's dealt levels," said a dealer with a private sector bank.

 

The price of the benchmark 11.50 per cent 2011 paper, the yield of which dipped to an all-time low of 9.21 per cent and is now hovering around 9.25 per cent, will be steady. On Saturday the paper was dealt at Rs 114.72 levels.

The government securities market will see buying interest in high-coupon papers like the 11.40 per cent 2008 and the 12.50 per cent 2004 as players would like to build an investment portfolio to maintain their current income.

This is because, yields on government securities are expected to go up next month, said an analyst.

Mutual funds could show buying interest in the 2004, 2008 and 2009 papers as their yields, ranging between 7.40 to 7.80 per cent, are attractive and allow for capital appreciation, said a dealer with a public sector bank.