Market bearish on securities cut-off yield

The cut-off yield announced in the government securities auction today has further marred the sentiment in the market, which was already bearish even with comfortable liquidity.

These papers- 7.49 per cent 2017 and 8.33 per cent 2036 were auctioned by the Reserve Bank of India as part of the government borrowing programme.

The papers absorbed Rs 10,000 crore from the market and were oversubscribed by around Rs 9,500 crore.

The market sentiment has been badly hit by the cut-off for 7.49 per cent 2017, which figured at 8.31 per cent as against an expectation of 8.26-8.27 per cent. "The market was not euphoric for the paper even if it carried an attractive tenure of 10 year, which serves as the benchmark. The market has been comfortable with the existing 8.07 per cent 2017. Even then the cut-off yield is too bearish," said a market dealer.

On the other hand, the 8.33 per cent 2036 paper fetched a cut-off yield of 8.65 per cent, which is according to the market expectation.

Even as the liquidity was comfortable and the inflation figured below 6 per cent at 5.66 per cent, the yield on the 10-year benchmark paper - 8.07 per cent 2017, rose to a high of 8.17 per cent as against 8.12 per cent on Thursday.

Moreover the RBI also announced bonds worth Rs 6,000 crore under the market stabilisation scheme to absorb excess liquidity from the market.

In the foreign exchange market, while demand for oil weighed down heavily on the spot rupee to depreciate, aggressive selling of dollars by exporters helped it to gain and close at 41.22 after opening at 41.45 to a dollar.

Easy liquidity, however helped the forward premia to close soft. The annualised premia for the six-month and one-year forward dollars closed at 4.50 per cent and 4.01 per cent, respectively, as against 4.94 per cent and 4.19 per cent, respectively, on Thursday.