The massive devolvement of 48 per cent on the paper was perpetuated by the long-term tenure of the security and the fact that the overnight money rates were ruling at high levels of between 10.75 per cent and 11 per cent for the past few days.RBI took on Rs 924.33 crore of the devolved amount and the primary dealers took on Rs 107.29 crore.
On Monday morning, primary dealers (PDs) were reported to be offering a higher commission to banks in order to get them to subscribe to the paper. It is expected that the PDs will try and offload the security in the secondary market in huge volumes. With the busy season approaching, bankers are apprehensive of picking up large amounts in a long dated paper. In the secondary market, a three-year paper is giving a yield of 13.70/75 per cent which makes the 10-year paper less attractive for banks.
The only participants in the paper were said to be public sector banks, insurance and provident funds. RBI is better equipped to handle a devolvement as the current level of resort to ad hocs is low. The ad hoc level had been over the Rs 9,000 crore-mark for the past many months.
