Gilt yields flat, as traders take a pause to build positions

Gilt yields remained flat on Sep. 20, 2007, as traders refrained from building fresh positions in the debt market.

After the payment of corporate taxes, there was a dearth of liquidity in the banking system, which resulted the overnight call rates to hover over 7% mark.

Investors currently are not building fresh positions for two reasons. Firstly, after the Fed cut, Rupee is soaring like anything, hitting the exporters the hardest. RBI intervened in the forex market by purchasing Dollar, which means there, is increase in money supply. It would be a conventional wisdom for traders to wait for inflation figures, which is expected to be lower. If inflation turns out to be low, then there would be ample liquidity conditions. Secondly, the traders need to take a pause on speculation that RBI may take a stance sooner or later on key interest rate, based on performance of global financial mar kets.

Traders may build up positions after the inflation figures are out tomorrow.

However, the benchmark 10-year bond yield ended at 7.82%, unchanged from Wednesday`s close.