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Home > Business > PTI > Report

Likely ECB rate cut may propel gilts market

June 05, 2003 21:51 IST

The European Central Bank is likely to cut interest rate in its meeting on Friday, which might prop up the government securities trading in India, market sources said on Thursday.

The expected rate cut by ECB in its meeting on June six may just provide the buying trigger in the (Indian) market, the sources said in New Delhi.

On the domestic policy, they said the announcement of a series of issuances much in advance seemed to reflect Reserve Bank's intention to keep the markets stable.

RBI governor Bimal Jalan had recently said the central bank would maintain its soft interest rate bias, while ruling out repo rate cut immediately.

"In the absence of repo rate cut, the yields in treasury bills tend to correct and rise above the repo rate. However, at present, T-bills yields are below repo rate continuously for over six weeks and this is perhaps the longest stretch in the recent times to have witnessed such an aberration in the short term yields," the market sources said.

RBI slashed the benchmark bank rate by 0.25 per cent to 6 per cent in the slack season credit policy in April.

The apex bank also decided to reduce cash reserve ratio by 0.25 per cent to 4.5 per cent from June 14, as part of efforts to ease credit flow further.

The sources said the gilts market was expected to move in a "narrow band" in view of subsequent state loans and advance tax outflows.


© Copyright 2003 PTI. All rights reserved. Republication or redistribution of PTI content, including by framing or similar means, is expressly prohibited without the prior written consent.





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