Cut-off yields to set the trend

GOVERMENT SECURITIES

The government borrowing programme holds key to the trend this week.

While the 2032 paper being auctioned this week is meant for the life insurance companies, trusts and provident funds, the cut-off yields for another paper being auctioned "" the 2012 issue "" would be the trendsetter.

The outlook among gilts mart participants is divided with a bearish note emerging from primary dealers and foreign banks and bullish sentiment being voiced by public sector banks. The outflow of Rs 11,500 crore this week would not be of much impact, dealers said.

They said surplus liquidity in the system would facilitate a comfortable kickoff to the government's borrowing programme. The funds pile will rise further due to government expenditure and capital flows into the Indian equity and debt markets.

Meantime, the ten-year benchmark yield is expected to rule in the range of 6.65-70 per cent this week.

Recap: The yield on government securities rose to reach a high of 6.70 per cent at the beginning of last week. However, buying demand from public sector banks pushed the yields down to 6.66-6.67 per cent.