The Reserve Bank of India (RBI) today mopped up Rs 10,874 crore against the targeted Rs 11,000 crore through the open market operation (OMO) sales of two government securities from its kitty. The weighted average cut-off prices that emerged at the auction - Rs 100.73 on the 15-year gilt and Rs 100.48 on the 7-year gilt - were above market expectations indicating that the yields will continue their southward journey.
At the auction of the 6.25 per cent 2018 gilt, the central bank received 244 bids aggregating Rs 9,560 crore against the targeted Rs 6,000 crore. It accepted 141 bids for the targeted amount. That there was aggressive bidding on this gilt only indicates that the market expects the yields to soften further.
Though the cut-off price on this gilt was Rs 100.51 (yield : 6.197 per cent), the weighted average cut-off was higher at Rs 100.73 (6.17 per cent), pointing to the fact the market is bullish at the long-end of the yield curve. Post-OMO, this gilt was dealt higher at Rs 101.40 (6.1056 per cent).
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At the auction of the 7.55 per cent 2010 gilt, the RBI received 158 bids aggregating Rs 4,874 crore against the targeted Rs 5,000 crore. It accepted all the bids. In fact the market was expecting this paper to be subscribed fully. Market players feel that interest in short-dated gilts has ebbed.
While the cut off on the seven year gilt was below par at Rs 99.80 (5.905 per cent), the weighted average cut-off was higher at Rs 100.48 (5.7850 per cent). There was not much trading in this gilt after the OMO.
Post-OMO gilt price rallied. The 7.40 per cent 2012 gilt, which opened at Rs 110.20 and was dealt lower at Rs 110 just before auction results were announced, post-OMO results edged up to close at Rs 110.50.