Cut-offs in line with market expectations
The Reserve Bank of India (RBI) today received subscriptions worth Rs 27,236 crore towards the triple auction of dated government papers against a notified amount of Rs 12,000 crore, indicating the massive liquidity in the banking system.
In line with the market expectations, a cut-off yield of 5.96 per cent was announced for the 6.05 per cent 2019 paper, 5.76 per cent for the 7.37 per cent 2014 issue and 6.10 per cent for the 6.13 per cent 2028.
While the RBI accepted bids worth Rs 11,652 crore, the amount underwritten by the primary dealers figured at Rs 8190 crore.
Another pointer to the cash glut in the system was the repo subscriptions of around Rs 36,000 crore.
Although the auction held on Tuesday was scheduled, the notified amount was increased from Rs 9,000 crore to Rs 12,000 crore last week.
This formed part of the spate of measures announced last week by the RBI to manage excess liquidity.
However, later it was clarified by the governor that the amount had to be raised for meeting the government borrowing programme and not to suck out the excess liquidity.
According to dealers, the cut-offs added to a positive sentiment in the market as against a bearish outlook in the first half after the primary dealers were offered two paise underwriting fee which is considered a bit high by the market.
They said the higher underwriting fee implied weak response toward these papers by the market and it was expected that the bidding will be at higher levels than the market yields.
In that case, most of the amount would have devolved on primary dealers. However, there was no devolvement on primary dealers.
Meanwhile, yields on bonds auctioned on Tuesday were dealt below the cut-off yield in evening trade but profit sales kept sentiment wary.
Traders said they were cautious because of fears the central bank may sell bonds from its portfolio to absorb surplus cash. The 7.37 per cent 2014 bond was dealt 5.7567 per cent, marginally below the 5.7590 per cent at which the bond was auctioned.
The 6.05 per cent 2019 bond was traded at 5.9467 per cent, against the 5.9613 per cent it was auctioned at. The 10-year 9.81 per cent 2013 bond was dealt at 5.7208 per cent, against the previous close of 5.7272 per cent on Saturday.
The market did not trade on Monday as the central bank
