Lateral run likely, long papers in focus

Outlook: Government securities

The government securities market is expected to move sideways with the benchmark 10-year yield hovering in the range of 5.06 to 5.10 per cent this week.

Long-term papers (especially the 2017 segment) are expected to witness active trading.

Surplus liquidity in the system will cap any major losses.

The Reserve Bank of India (RBI) will conduct a 91-day treasury bill auction and a 364-day treasury bill auction to mop up Rs 4,000 crore on April 28 and re-issue 6.18 per cent 2005 paper worth Rs 5,000 crore under the market stabilisation scheme on April 27 using the price-based method.

The cut-off yields set on these papers will also decide the trend.

Going by last week's cut-off rates, dealers expect the RBI to keep the yield almost unchanged at 4.38 per cent on the 91-day bill.

And for the 364-day bill, it is seen setting a cut-off yield of around 4.45-4.47 per cent.

Yields are expected to firm up after the elections as the new government is expected to raise oil prices.

This could have an adverse impact on the annual rate of inflation, which, in turn, would put pressure on the yields.

Traders will take cues from inflation data, which will be released by the commerce ministry on Friday.