Thursday's twin auction for Rs 6,000 crore worth government security, including the 13.05 per cent 2007 paper (for Rs 2000 crore) and 10.71 per cent 2016 paper (for Rs 4,000 crore) was just oversubscribed. The auction was done through open market operations of the Reserve Bank of India (RBI).
The RBI received 192 bids of Rs 4,004 crore for 10.71 per cent 2016 paper. The apex bank, however, decided to accept only 175 bids of Rs 3,731 crore.
The cut-off price of the auctions were pegged at Rs 107. The estimated yield at the cut-off price was 9.7964 percent.
The central bank received 43 bids worth Rs 2,350 crore for 13.05 per cent 2007 paper, of which it accepted 18 bids of Rs 2,000 crore. The cut-off price for the auction was at Rs 120.69.
Money market dealers said good liquidity conditions in the money market helped both the auctions to sail through.
A dealer with a private sector bank said, "Rs 6,000 crore is a minuscule amount in the current liquidity context."
He pointed out to the Rs 9,500 crore of repo outflow, to underscore the easy liquidity conditions.
Another dealer said the ample liquidity in the money market helped the RBI to off-load both there illiquid stocks. The central bank would not get such response but for the fluid market.
Today's open market auction followed the open market sale of 10.25 percent 2021 paper for Rs 4,000 crore at Rs 102.50 yesterday.
Dealers feel that the RBI is worried about the excess liquidity in the market that may drive down the yields at unsustainable lows and the recent open market operations are the measures to arrest the fall in yields.
The yield on 10-year paper hit the all-time low of 9.07 per cent on Monday, but rebounded to 9.12 per cent following the auction announcement.
