Bond auction devolves marginally; rupee rises

The govt bonds auction of Rs 15,000 crore, there was devolvement on primary dealers to the extent of Rs 1,330.28 cr

The central bank showed its resolve to continue with tight money policy to keep short-term rates high, as it accepted most of the bids of the bond auction. However, there was a marginal devolvement of around 10 per cent, since some of the bids came at a very high rate, but the devolvement was lower than last week.

According to market participants, RBI’s measures are yielding results as rupee strengthened to a five-week high, which closed at 59.04 a dollar as compared to the previous close of 59.11.

The government bonds auction of Rs 15,000 crore, there was devolvement on primary dealers to the extent of Rs 1,330.28 crore.

Earlier this week, RBI tightened liquidity further, which resulted in traders losing interest in fresh purchase of government bonds in Friday’s auction. The auction was just few days before the first-quarter review of the monetary policy. The Street is waiting for fresh cues on liquidity and interest rates.

There was devolvement in the 8.12 per cent 2020 government bond worth Rs 371.03 crore and in the 8.32 per cent 2032 government bond worth Rs 959.25 crore. There was no devolvement in the 7.38 per cent 2015 and 8.20 per cent 2025 government bond.

“Traders might have quoted yields above the cut-off yield due to which bids got rejected and there was partial devolvement,” said Baljinder Singh, government bonds dealer at Andhra Bank.

The cut-off yield for the 8.12 per cent 2020 paper was at 8.6747 per cent and for the  8.32 per cent 2032 paper it was 8.5747 per cent. While for the 7.38 per cent 2015 paper it was 8.9982 per cent, for the 8.20 per cent 2025 paper it was 8.4629 per cent. The yield on the 10-year benchmark bond 7.16 per cent 2023 ended at 8.16 per cent on Friday, compared with the previous close of 8.19 per cent.

However, due to RBI’s liquidity tightening moves announced earlier this week, in the inter-bank money market, the weighted average three-day call money rate rose to 10.01 per cent, compared with 8.32 per cent on Thursday. According to dealers, this was because banks were covering their requirements. Dealers expect call money rates to touch 11 per cent next week as from Saturday, when a new reporting fortnight starts, banks would be required to maintain a minimum daily cash reserve ratio (CRR) balance of 99 per cent of the requirement.

So far banks were allowed to maintain their CRR prescribed by the RBI on an average daily basis during a reporting fortnight, with a minimum of 70 per cent of the required CRR on a daily basis.