The Hindu Business Line : Blix revives debt market

DEBT market players heaved a sigh of relief as the UN chief weapons inspector, Dr Hans Blix, submitted his report on Iraq. With war now seeming a "distant possibility'', the Indian debt markets staged the much-awaited revival in G-sec prices on Saturday, a half trading day for the markets.

However, some players dismiss today's positive activity as a mere "flash in the pan''.

In the past fortnight, G-sec prices had been plummeting by Rs 5-12 on account of growing uncertainties in the US-Iraq stand-off. With much anxiety amongst debt market participants, each trading day saw new lows in terms of G-sec prices and a resultant dip in every player's portfolio.

With the Hans Blix weapons report on Iraq out late Friday, the markets witnessed an improvement in sentiment today.

According to analysts, Washington and London will seize on the evidence that Iraq is not complying with the spirit of the Security Council demands. Contesting this view, France and Russia argue that the inspection process is only beginning and needs more time to produce a verdict on Iraq.

Given this argument, even if the US were to go to war, "US would have to go it alone and therefore it would be a muted war,'' said the relieved treasury head of a private-sector bank.

A "reverse rally'' is on. The markets had over-reacted to the war tensions in West Asia in the fortnight gone by, said a senior official in a primary dealer.

G-sec prices went up today by Rs 1-2 across maturities. The 10-year benchmark, the 9.81 per cent 2013 paper ended the day at Rs 124.50 and a yield of 6.51 per cent higher as compared to Friday's closing price of Rs 123.30/40.

Players who had been on the sidelines over the past fortnight, joined in to trade today. Nationalised banks came into the market to trade and the volumes were on the higher side at over Rs 2,000 crore, said the treasury head in an active public sector bank.

The expectation is that the days of the bull run and of frenzied activity in the debt markets should be back in the week ahead.

The liquidity in the debt markets is expected to be comfortable with the sudden surge in the demand for dollars having subsided with the quelling of war fears. .

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