Government security prices are likely to go up by 20-25 paise this week after the banking system received a Rs 6000 crore liquidity shot following the first round of 175 basis point cut in cash reserve ratio (CRR) on Saturday.
"There is already a good amount of liquidity and the sentiment is upbeat after the busy-season credit policy. With Rs 6,000 crore more infused through CRR cut, prices are expected to rally further," a dealer said.
The refrain among dealers is that yield on the 10-year paper, which is at present around 8.77 per cent, could touch the 8.75 per cent mark by the end of this week.
One dealer expected an auction announcement this week, but he felt it will be for a small amount -- below Rs 5,000 crore. "Hence the sentiment will remain unaffected."
Dealers, however, expect some resistance and profit-booking if the prices rise too much.
"Prices are already at a very high level and hence, after a steady increase during the initial part of the week, there will be profit-booking," a primary dealer pointed out.
The 10-year paper yield is expected to face resistance once it touches 8.75 per cent levels.
Government security prices went up by 20-25 paise on Saturday due the abundant liquidity.
"Trading volume was low, but sentiment was good. Prices continued to rally helped by the liquidity," a primary dealer said.
