The prices of most Government of India securities firmed up yesterday in the face of rumours about a massive cash reserve ratio (CRR) cut. Turnover in the debt market surged to Rs 232.12 crore.
The yield on gilts, accordingly, went down. In the case of the 364-day treasury bills, the yields went down from 12.75 per cent to 12.65 per cent.
Most dated securities were reported to have been purchased by foreign banks and the newly-set up private sector banks.
Dealers said that the spurt in trading in the government securities market was in keeping with the trend where the volumes surged on rumours of a CRR cut. If the CRR were to be slashed by 0.5 percentage point, in line with the market expectations, Rs 2,000 crore is likely to flow into the system.
This would leave most banks sitting on excess funds. In that event, gilts could turn out to be an attractive avenue for deployment of surplus money. It was reported that the new zero coupon bond which is being put up for sale on Monday, is unlikely to garner full subscription.
The paper is not proving to be very attractive for banks. However, banks have already begun receiving instructions, or what is more appropriately termed moral suasion, from the Reserve Bank of India asking them to pick up the paper.
