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Good buying interest in long-term papers

Our Bureau

MUMBAI, Dec. 14

THE continuing liquidity surplus in the financial markets has resulted in yields on long-dated securities falling. Security prices rallied with actively traded papers moving up by around 5-7 paise on account of some fresh buying interest. Dealers said th e markets were bullish today compared to the previous day.

``There was good buying interest for long-dated securities and even papers in the shorter end such as the 11.15 per cent 2002 saw some buying interest,'' said a dealer in a private sector bank. But there were few sellers for such short-term papers.

As a result, interest switched to long-dated securities. The 11.30 per cent 2010 paper, which had traded up to Rs 101.11 previously, ended the day at Rs 101.18. This would mean a drop in the yield to maturities as well. The YTM for this security today wa s reported at 11.09 per cent (11.13 per cent). Dealers estimated the trading volume of this security to be in the region of Rs 250 crore.

The 11.40 per cent 2008 paper, which had closed at Rs 102.58 previously, ended at around Rs 102.63 today. These rates translate into an YTM of 10.88 per cent. Dealers said that approximately Rs 200 crore of these securities were traded.

Some dealers attribute the renewed buying interest to the fact that call rates did not rise as high as was expected post-auction.

``Auction outflows were expected to push call rates high today. Also, the auction numbers that came through showed that it was the banks and not primary dealers that were big buyers in the recent auction resulting in some positive interest,'' said anothe r dealer.

However, some others felt that the markets were trading on the conservative side as foreign banks, usually big players, were not very active today. But dealers indicated that the fall in yields is likely to taper off. This is on expectation of advance t ax outflows of Rs 8,000 crore next week .

This continuing low yield situation has prompted a rush of public sector borrowers in the market. The Rural Electrification Corporation has already benefited from this and managed to raise funds at 11.50 per cent. The other PSUs included the National Hou sing Bank, Nuclear Power Corporation, Hudco and the Export Import Bank of India. But, there was very little interest in PSU bonds in the secondary markets, the dealers said.