T-Bill cut-offs to improve liquidity: The 14-day treasury bill cut-off remained flat at 9.16 per cent while the 91-day treasury bill cut-off was 17 basis points lower at 9.40 per cent. Both the issuances were fully subscribed.

Centre raises Rs 183 cr via Gail divestment: The government has raised Rs 183 crore through sale of Gail's shares. The total amount raised through disinvestment this year has touched Rs 408 crore against the budgeted amount of Rs 5000 crore. Before the current fiscal ends, possibly two moredisinvestmnets, VSNL and IOC would be completed. This would be in addition to the buyback scheme structured amongst the oil PSUs, expected to transfer approximately Rs 5000 crore to the centre's kitty.

Gilts markets stay bullish: Despite call money rates staying close to 9 per cent, the underlying sentiment in bond markets was bullish. With more than Rs 2,000 crore inflows into the system this week, a stable call money market is expected to provide support to the bullish sentiment. The entire market is expecting a partial roll-back by the RBI of the August measures before the current fiscal ends. The year-end portfolio valuation of banks as well as the next sovereign borrowing programme would be the primary drivers.

With the long-end of the yield curve not expected to shift significantly, our recommended portfolio continues its short-end bias. Significant amounts of 11.98 per cent 2004 and 12.25 per cent 2008 have been picked-up from RBI's OMO window (more than Rs 3000 crore since January 1999).However, we do not expect significant appreciation in the medium and long ends, with RBI expected to remain an active OMO seller. The last two arounds of private placements totalling Rs 8,000 crore would put pressure on the RBI to reduce as much of the monetisation as possible by the fiscal-end.

Corporate paper: Short-term commercial paper rates did not decline as average call rates during the past week persisted close to 9 per cent levels and primary issuances continued. The three-month rate was at 10.75 per cent - 10.90 per cent, while the one-month and the two-month levels were at 10 per cent-10.10 per cent and 10.25 per cent, respectively. With the current fiscal drawing to a close, end-March CPs quoted at 10.25 per cent. Even though we expect call rates to fall this week (the second half of the reporting fortnight, on the back of substantial cash inflows), short-term corporate rates are not expected to come down significantly. The FI yield curve did not budge. The one, two, three and five yearrates were at 12.60 per cent, 13 per cent-13.25 per cent, 13.50 per cent and 14 per cent, respectively.

Infrastructure bonds to enter market: The central government has granted approval for 11 infrastructure entities permitting them to raise money under section 10 (23G) of the Income Tax Act. These 11 companies belong to the power and transportation sectors. These entities are expected to raise over Rs 1,000 crore from the primary market in the next couple of months.