The gilt prices on Saturday fell around 5-10 paise in the morning hours. However, the prices came back to the Friday's level in the later hours of the day. On the whole, the volume of trade was very thin.
"As there was a shortage of liquidity in the system and a high demand for call money on the first day of reporting fortnight, there was not much activity in the securities market," said a dealer with a private bank.
After the RBI asked some of the corporates to bring back overseas issues on loans, dealers in the market expect the forex market will cool down. "As forex market is expected to be non-volatile, the repo rate on an average will be lower in the next week," a dealer with a nationalised bank said. Dealers expect that the lower repo rate will help the prices to go up.
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The dealers, however, expect not much trading at the long end. "Most of the trades in the coming week also be for the short and medium end," said a primary dealer. "There may be some movement at the longer end after a week, provided the rupee stabilises," said a primary dealer.
The liquidity situation, which is already easy, is expected to ease further in this week following redemption and coupon payments of government securities. Moreover, the players expect no auction in the week. The easy liquidity situation, coupled with a stable forex market, is likely to push up the gilt prices.