Govt bond for Rs 33,000 crore sails through as RBI accepts bids

Signals central bank's comfort with yields

Showing comfort with the pricing level in the bond auction, the Reserve Bank of India (RBI) on Friday accepted bids for four government bonds worth Rs 33,000 crore.

This was the first auction for Government of India bonds after the monetary policy review on June 8. The 10-year (6.54 per cent 2032) bond was also part of the auction.

The RBI accepted bids for 10-year benchmark with a cut-off level of 7.51 per cent for Rs 13,000 crore.

For bonds maturing next year (4.56 per cent GS 2023), the cut-off yield was 6.41 per cent for Rs 4,000 crore.

The other securities in auction were 7.1 per cent GS 2029 for Rs 7,000 crore and 6.95 per cent GS 2061 for Rs 9,000 crore.

Bond dealers said RBI’s cut-off at bond auction was in sync with the market trends.

According to Clearing Corporation of India (CCIL) data on opening trades, the yield on the 10-year paper was 7.5 per cent.

It moved between a low of 7.49 per cent and high of 7.52 per cent through trading day. The yield at close on the benchmark paper was 7.51 per cent.

The yield on 10-year paper is expected to remain range-bound in the near term. 

Later, the yield could inch up 7.75-8 per cent as the RBI moves towards calibrated withdrawal of liquidity, dealers said.

RBI Governor Shaktikanta Das had said the central bank will support the government with its record borrowing programme and is monitoring yields.

Analysts said the RBI seems to be seriously considering Operation Twist, since the introduction of the uncollateralised Standing Deposit Facility (SDF).

However, in the near term, they do not believe that the RBI will announce measures as the rise in 10-year yields has been fairly orderly.

Support will likely be more forthcoming as the benchmark bond yield approaches the 7.75-8 per cent handle.