Gilt Rally To Continue

The government security market is expected to see the liquidity-driven rally continue this week.

Money market dealers said, though there is likely to be an open market sale of Rs 4,000 crore during the week, the condition will remain fluid enough to support a rally of Rs 1-1.50 at the medium and long end of the market."

"Given the market liquidity condition, Rs 4,000 crore is a very little amount. Prices will move up even further despite the open market sale," a dealer said. The 10-year paper yield, currently around 8.15 per cent, is likely to dip beyond the eight per cent level by the end of the week.

 

The treasury head of a private sector bank said the Reserve Bank of India (RBI) governor's comfort with the current fall in yields (as evident from the statement made by the governor last week) will help prices go up. "The governor has made it clear that the RBI is not going to do anything to stop the rally. On the back of this, buying interest will prevail in the market," the dealer added.

Government security prices were up 25-30 paise on Saturday. Dealers said the trading volume was high compared with the usual Saturday trading scene. However, most of the trading was for the papers with 10-15 year maturity.