The Reserve Bank of India (RBI) today announced a twin auction for Rs 7,000 crore on August 27. The RBI will sell a new 15-year stock for a notified amount of Rs 5,000 crore through a yield-based auction using multiple price method.
It will also auction new 30-year stock of a notified amount of Rs 2,000 crore through a yield based auction using the uniform price method.
The RBI has cut down the issue size as going by its issuance calender, the government was supposed to raise Rs 6,000 crore thorugh a 15-year paper and Rs 2,000 crore 20-year gilt in the last week of August.
The central bank said taking into account all relevant factors, it has been decided to issue a new 15-year stock for a reduced amount and a new 30-year stock for Rs 2,000 crore.
Demand for the 30-year paper is expected to come from the insurance sector provided the cut-off yields are attractive enough.
Money market dealers have not been active in the market, mainly staying on the sidelines, as they fret over the size of next week's 15-year government issue. The market was hoping for the central bank to downsize the issue, as yields are under pressure to rise.
With the RBI having decided to cut the 15-year size by Rs 1000 crore, prices are expected to remain steady.
Another issue of Rs 8,000 crore is expected to pump out the liquidity in the market in the early part of September, with the issue of long-term bonds.
