The government security prices are likely stage mild rally driven by the easy liquidity in the banking system. Dealers said the trading will be concentrated in the papers of 5-10 year maturity.
A dealer with a foreign bank said, "The prices of the long-term securities are already high. So, the action will be mainly at the medium end of the market, which are likely to go up."
Dealers expect the yield of 10-year paper to remain in a range of 7.30 per cent to 7.35 per cent. However, some dealers are expecting that the Reserve Bank of India (RBI) may conduct open-market operation, which can hamper the sentiment of the government security market.
A dealer with a private sector bank said, "The expectations of an open-market auction will itself check the the rally in government security market. We do not see prices to go up more than 40-45 paise across all maturity."
On Saturday, last week, the government security prices were up by 15-20 paise. Dealers said the rally was due to ample liquidity in the market, and also because of absence of any negative news.
