RBI accepts only LIC bid out of 255 made for 17-year paper

Life Insurance Corporation is learnt to have subscribed to the entire government stock of 8.35 per cent 2022 in the auction held here today.

The Reserve Bank of India, in the auction, received 255 bids worth Rs 10,467 crore whereas it accepted only one bid "" from LIC "" for a notified amount of Rs 4,000 crore.

According to market dealers, the paper being long term in nature has been completely lapped up by the life insurance major at a cut-off yield of 7.28 per cent.

Market dealers said, the market was expecting the RBI to announce a cut-off yield of 7.45 per cent , almost 17 basis points higher than the actual cut-off yield.

They also said that the prices were pushed up by aggressive bidding of the life insurance major which is particularly interested in such long-term majors. Banks usually subscribe to these papers but cautiously as they do not have such long term liabilities.

Most of the banks have been trying to cut down the duration ( average maturity) of their investment portfolio to four years after the RBI allowed them to transfer part of their trading portfolio to non-trading portfolio in the held-to-maturity category.

In price terms, the paper was picked up at Rs 110.30. The RBI, however, accepted all 58 non-competitive bids received for a total amount of Rs 55 crore.

Meanwhile, the Reserve Bank of India today extended the timing for settlement in the negotiated dealing system to 6.15 p.m. today as against the closing of trading time at 5.30 p.m. usually.

Explaining this, market dealers said that the timing of settlement on the NDS was extended as the new norm of T+0 settlement comes into effect from today.

Usually, the banks and other market players follow T+1 settlement, which will continue to exist along with the T+0 pattern.

Therefore, the timing was extended so as to facilitate a smooth transition from T+1 to T+0 in the market. The new norms of T+0 was announced as part of the annual credit policy announcements on April 28.