G-Sec prices seen gaining value on liquidity slosh

Srikesh P Menon

Mumbai, Aug 26: The government securities (GoI-Secs) prices are expected to rise further during the week with liquidity in the banking system remaining adequate, dealers said.

However, market players were not expecting the 10-year yield to breach the nine per cent mark in the near term.

“Though prices have been rising steadily, yields look very unlikely to cross the nine per cent mark as it will face lot of resistance there,” said ICICI Bank senior vice-president Narendra Gupta (domestic treasury).

In the long-tenors, most of the securities prices rose by more the Re one. The 11.03 per cent 2012, which was trading at around Rs 111.07 on August 20, rose to Rs 112.10 on Saturday.

The 11.50 per cent 2011A was at Rs 116.00, up from Rs 115.03 as on August 20. The 11.40 per cent 2008 was also up at Rs 116.10 on Saturday as compared to Rs 114.78 on August 20.

“Liquidity is of no concern. In fact, it is the main reason for such great buying demand in the market”, Mr Gupta said.

Liquidity in the banking system has been comfortable and got a boost from the Rs 8,000 crore of inflows via redemption of the 11.75 per cent 2001 on Saturday.

“The market also has been taking comfort from the fact that the ways and means advances (WMA) figure looks very comfortable and hence the government may not soon auction securities,” said 21st Century Shares & Securities Ltd director AVM Sundaram.

And he added, “Now only if the RBI think that securities prices are rising rapidly they may conduct and open market operation (OMO) sale to check the rise.”

As of August 17, the ways and means advances according to the Reserve Bank of India(RBI) was at Rs 259 crore.

“The dividend amount of Rs 9,000 crore transferred from RBI to the government also has helped in putting to rest any near term fears of an auction by the government,” Mr Sundaram said.

Traded volumes also saw a major rise during the week to Rs 16,000 crore as compared to around Rs 10,000-13,000 crore in the previous week.

“Securities prices may rise by another 25 paise during the week, as fears of an auction annoucement or an RBI OMO sale may hover over the minds of market players,” Mr Sundaram added.