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| Moreover, with the lucrative Libor-linked rates offered by the State Bank of India for its offshore deposit scheme - Pravasi sammridhi, market players feel that most of the redemption proceeds of Resurgent India Bonds will head to India. This in turn is likely to improve liquidity further.
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| Banks, which have been largely fence-sitters for the last two weeks and occasionally venturing to sell securities to meet their profit target for the second quarter, might enter the market to start a fresh portfolio.
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| Another section of the market, however, has a different view. As the new calendar is set to be unveiled, the week might see selling as players churning their portfolios.
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| It is learnt that banks may ask the central bank to review the decision of not using gilts from available for sale (AFS) category to trade under held for trading (HFT) category.
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| If no change occurs, either the trading portfolio under HFT will be allocated more securities than AFS or there will cautious trading. Mutual funds, on the other hand, will also venture into the market in a big way to churn portfolio.
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| The market will be cautious, even though liquidity is comfortable. This will be on account of the conversion of special securities into dated papers as the move is likely to enamour RBI with sufficient papers to effect an open market operations in case liquidity becomes a concern.
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| Last week saw one of the most actively traded days in the short-term segment as there was an arbitrage opportunity available between short-term papers and the 5-year swap rates.
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| Subsequently, the trading spree could not be sustained as selling set in. Towards the end of the week, cooperative banks were seen selling to meet the profit target for the second quarter.
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| On the other hand, bond market as a whole was bullish oh hopes of a repo, CRR and bank rate cut in the ensuing credit policy.
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| Short-term tenors rallied by 20-25 paise, while the 10-year benchmark 9.81 per cent 2013 closed lower at 5.27 per cent against its high of 5.33 per cent. |
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