Centre cancels Rs 8000 crore auction

The government today cancelled the scheduled Rs 8,000 crore government securities auction for December. This is the second auction cancelled during the current financial year. The Rs 5,000 crore government securities auction was cancelled in the second half of November.

The government is currently enjoying a good cash balance in the region of Rs 22,000 crore (with the central bank), said expenditure secretary Dhirendra Swarup. "We may borrow less this year as the cash position is good," he added. An additional amount of Rs 12,000 crore of government borrowing are scheduled through auctions in the next two months.

To date it has borrowed a gross of Rs 83,044 crore in the current fiscal.

Yields on government bond fell sharply following the announcement.

The yield on 7.38 per cent 2015 bond fell 30 basis points to 6.89 per cent and that on 7.37 per cent 2014 dropped to 6.90 per cent from Tuesday's close of 7.19 per cent.

Market sentiment got a boost as it was apprehensive that in the event of the government going ahead with the auction, yields on government paper would have moved up and thereby eroded the value of gilts portfolios.

Liquidity in the system may not have been able to take care of the Rs 8,000-crore auction as banks lent about Rs 4,520 crore in the one-day reverse repo today.

Meanwhile, the Reserve Bank of India has raised the cut-off price at its weekly auction of 91-day treasury bills to Rs 98.73 from Rs 98.70. With this the yield at the cut-off price fell to 5.1595 per cent from 5.2830 per cent in the previous week.

Altered calendar

WHAT'S IN THE OFFING:
January 1-8, 2005
Rs 7,000 crore:

i) 5-9 year security for Rs. 5,000 crore ii) 20-year and above security for Rs. 2,000 crore

February 1-8, 2005

15-19 year security for Rs. 5,000 crore

WHAT'S CANCELLED:
November 16-24, 2004

10-14 year security for Rs. 5,000 crore

December 1-8, 2004 Rs 8,000 crore:

i) 10-14 year security for Rs. 6,000 crore ii) 20-year and above security for Rs. 2,000 crore