Stable Run In Gilts Expected Amid Good Liquidity

The government security prices are likely to remain stable with an upward bias this week.

Dealers said the liquidity condition in the market will continue to be good. But they added that the Reserve Bank of India (RBI) may conduct open market operations (OMO) to mop up liquidity from the system.

The expected range of yield of the 10-year security is 7.50 per cent to 7.70 per cent. Dealers said most of the action will be in the range of 7- to 12-year papers.

A dealer with a new private sector bank said: "We do not expect the current liquidity comfort to go, even though the advance-tax outflow will start from June 15. However, it seems the central bank will not allow the yields to fall too much: it will conduct OMO, once the 10-year paper yield touches 7.50 per cent."

 

A dealer with a foreign bank said: "Knowing that the RBI will intervene if the yields fall too much, there will be a slight sell-off in the market on Friday and Saturday."

On Saturday last week, the government security prices went up by 15-20 paise because of ample funds with the system. However, there was bit of profit-booking at the higher levels.