The three-year central government paper was oversubscribed by over 1.5 times with the Reserve Bank of India (RBI) receiving 172 bids for Rs 5,745 crore against the notified amount of Rs 3,000 crore.
RBI fixed the cut-off yield at 12.14 per cent and the weighted average cut-off was 12.07 per cent. While RBI accepted 36 bids, four bidders got partial allotment. The cut-off is in line with the expectations of the market for the money market dealers had pointed out that if the central bank offered 12.15 per cent then the issue would sail through comfortably.
The overwhelming response to the issue implies that the paper should be quoted at a premium when it opens for trading.
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Till date the central government has borrowed Rs 14,000 crore by issue of dated securities.
While the government raised 10-year money at 13.05 per cent the cut-off in the auction of 5 year paper was 12.69 per cent.
The cut off at the auction of 364 day treasury bills has been 8.98 per cent.
The role of primary dealers is significant when one examines the issue of decline in the yields on government paper.
The primary dealers used to factor in a portion of the commissions that they received from the RBI into their bids.
This enabled them to quote finer prices and get a chunk of the securities which they offload in the secondary market at a premium to the banks and other institutional investors.
This was the last auction of dated securities where the primary dealers were entitled to commissions on their successful bids.