Gilt volumes drop on tight liquidity

MUMBAI: The government security market is lying low due to lack of cues and a liquidity crunch. Banks on Monday borrowed a whopping Rs 1,30,005 crore from the central bank through its liquidity adjustment facility, or the LAF window. Persistent tight liquidity conditions have dissuaded trade in government securities in the past two weeks.

Derivium Traditions MD Ashish Ghiya said: “Trading interest in the market is low, owing to liquidity tightness and seasonally, as we approach December, it has historically been a low-volume month.”

The volumes traded in the benchmark government bond was as low as Rs 680.24 crore at the end of the trading day while total volumes traded was around Rs 5,254 crore, according to CCIL data, on what analysts say was a particularly bad day. The total traded volume in government securities has fallen from Rs 20,868 crore on November 2 to the current figures. The number of trades has also steeply fallen from 2,449 trades on November 2 to 719 trades on Monday.

There is uncertainty in the markets, which is adding to the woes.