Gilt Prices May Stay Grooved

The prices of government securities are likely remain range-bound during this week due to easy liquidity but a possible auction. Dealers said the prices should move in a band of 15-30 paise.

A dealer said, "There is enough liquidity in the market. However, a part of it will be sucked by the auction, which is expected this week. Moreover, as the yields of securities have already reached the bottom, we expect the prices to remain range-bound."

Trading in the government securities market was dull on Saturday. A dealer with a private sector bank said, "Generally, the volumes are low on Saturdays. Moreover, as the market is expecting another auction, banks and primary dealers stayed aside."

 

Dealers are expecting the maturity of the auction to be in the range of 5-10 years. A dealer said, "There was oversupply of long-term securities and hence very little appetite for them. The Reserve Bank of India seems to have understood this. That is why its last auction was a 10-year paper. We expect the next auction also to be a medium-term one."

However, the dealers are expecting the auction to be oversubscribed, as the banks are flooded with liquidity because of huge deposit mobilisation. The treasury head of a private sector bank said, "Now, players are habituated with an auction every week and so they have kept aside funds for the purpose. So, this auction is also expected to receive good response."