Twin auction of Rs 7,000 crore of government security sailed through today. The 11-year paper was oversubscribed by more than 57 per cent, while the 20-year paper was oversubscribed by more than 92 per cent.
With today's auction more than 70 per cent of the gross government borrowing programme of Rs 1,19,770 crore has been completed.
The central bank received 252 bids of Rs 7,892 crore for the 11-year paper, of which it accepted 190 for the notified amount of Rs 5,000 crore at a cut-off rate of f 9.40 per cent.
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The weighted average yield at the auction was 9.36 per cent and there was a partial allotment of 62.57 percent on 34 bids.
The apex bank received 159 bids for Rs 3,844 crore for the 20-year paper, of which it accepted 31 for the notified amount of Rs 2,000 crore at a cut-off yield of 10.18 per cent . The weighted average yield at the auction was 10.16 per cent and there was a partial allotment of 36.75 per cent on 12 bids.
Money market dealers though have expected the 20-year paper to receive good response, they expected minor devolvement on the 11-year paper. Said a primary dealer, "For the 20-year paper the insurance companies were the main bidders as expected earlier. For the 11-year paper it is the high cut-off yield that did the trick for oversubscription" The secondary market yield for 11-year paper was at 9.32 per cent.
Trading in the government security market, today remained dull on the eve of the auction. Dealers said that the market participants were waiting for the auction cut-off as it will give them a signal on the future movements of the interest rates.
As the cut-off yields were higher than the market yields dealers are expecting the security yields to go up tomorrow.