Gilts prices perk up by 35-50 paise on demand from state-run banks

Our Banking Bureau

Mumbai, Aug 10: Government securities (GoI-Secs) prices rose by nearly 35-50 paise on Friday owing to strong demand from fund-flush state-run banks. The 11.50 per cent 2011A paper which was at Rs 114.30 on Thursday, rose to touch an intra-day high of Rs 114.66. The paper was at Rs 114.60 in late trade on Friday. The 11.03 per cent 2012 was trading at Rs 109.64, compared with 109.35 on Thursday.

Though the recent auction of 9.81 per cent 2013 paper devolved to the extent of Rs 735 crore on primary dealers (PD) and Rs 679 crore on the Reserve Bank of India, it was not due to liquidity concerns.

"The devolvement was mainly due to the downgrade by Standard & Poor’s (S&P) which caused a bit of concern in the market," said Discount & Finance House of India’s (DFHI) chief dealer, Sabira Gopinath whole adding: "Mostly PDs like us and private banks lowered their bids following the downgrade". Ms Gopinath said that the market is now bullish because no further auctions are expected atleast until the end of August.

GoI-Sec prices had dropped late Tuesday on reports of a downgrade by rating agency S&P of the country’s long-term local currency rating to ‘BBB-’ from ‘BBB’. S&P, while downgrading the country’s long-term local currency sovereign credit, had however affirmed its ‘BB’ long-term and ‘B’ short-term foreign currency sovereign credit as well as the ‘A-3’ short-term local currency sovereign credit rating on the country.

"The 9.81 per cent 2013 paper is not such a popular paper as it is not evenly distributed," a dealer at a private bank said adding: "It is mostly held by PDs and if liquidity was a concern the other paper also would have not gone through smoothly".