All Eyes On Auction

GILTS & BONDS Market

The Rs 5,000-crore government securities auction is expected to grab the center stage this week. The auction is a reissue of the 11.10 per cent 2003 and 11.68 per cent 2006 securities worth Rs 2,500 crore each.

Dealers expect the auction to sail through smoothly as most of the activity in the market is now centered in the short-to- medium-term tenors.

"The Reserve Bank of India is taking advantage of the fact that the market is now mainly interested in the short-end of the yield curve," said a dealer.

"A good subscription is expected and there is not likely to be any devolvement," they said.

 

Dealers, following the auction, expect a rally in the short and medium term papers. However, a bearish sentiment in the longer tenors continues to persist in the market though there are some believe that yields are likely to have topped out in the long maturities.

"There could be some increased trading activity in the longer term gilts. However, the pessimism is still very much there and that will continue to exist," said a dealer with a private bank.

"The gaps in yields in the long-term tenors have widened to considerable extent and we could see some increased action in securities with maturities in the 2007-2010 range," said a dealer.