Signals discomfort with hardening yields.
Signalling its “discomfort” with hardening of yields, the Reserve Bank of India (RBI) today rejected all bids submitted for government bond auction for raising Rs 12,000 crore.
The government had scheduled the auction for today to sell “6.49 per cent paper 2015” for Rs 4,000 crore, “6.9 per cent paper 2019” for Rs 6,000 crore, and “7.40 per cent paper 2035” for Rs 2,000 crore.
RBI in a statement said the government in consultation with the central bank has rejected all the bids submitted in the above auctions.
Bond dealers said though major players (banks) were absent due to the two-day PSU banks’ strike, the participating banks, though few in numbers, and bond houses placed aggressive bids.
Some of the bids for the 10-year benchmark (6.9 per cent 2019 paper) were placed above 7.2 per cent, much above the closing yield of 7.08 per cent for yesterday, dealers said.
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The yields eased tracking rejection of G-sec auction bids by RBI. The trading volumes in G-sec market remained low tracking the bankers’ strike. The yield for at close of trading was 7.03 per cent, according to data available with the Negotiated Dealing System.
Dealers said yield on a 10-year paper had risen by 30 basis points since mid-July. There has been no material change in the economic climate for hardening of yields. There is ample liquidity in the system, they added. The yields are expected to ease next week on RBI signal, said a head of public sector bond house.
Meanwhile, RBI said it would conduct auction on August 14 to raise Rs 12,000 crore, including issuance of a seven-year paper for Rs 6,000 crore.