RBI partially devolves 10-yr green bond; $/rupee swap attracts 5 times bids

The Reserve Bank of India (RBI) partially devolved Rs 3,945 crore worth of 10-year sovereign green bonds to primary dealers as it sought to sell the bonds at a premium, according to dealers.

 

The RBI accepted Rs 1,054 crore worth of green bonds at the auction, against the notified amount of Rs 5,000 crore.

 

“They were aiming for a greenium, which has been the case for all green bond auctions,” said a dealer at a state-owned bank. “Bidding was at market levels,” he added.

 

"Greenium" refers to the premium investors are willing to pay for green bonds due to their sustainability impact.

 

 

Meanwhile, the $5 billion six-month dollar/rupee buy-sell swap auction attracted five times the bids, with a total of $25 billion in demand against the notified amount of $5 billion. The RBI received a total of 253 bids.

 

“Naturally there was demand, and the premium cut-off was slightly below market level,” said a dealer at a private bank. 

 

After evaluating current liquidity and financial conditions, the RBI had announced a series of measures to inject durable liquidity into the banking system. Among these measures was a USD/INR buy/sell swap auction of $5 billion for a six-month tenor, which took place on Friday.

 

The net liquidity in the banking system was in a deficit of Rs 2.2 trillion on Thursday, latest RBI data showed.

 

Following the auction results, dollar-rupee 1-year forward premium fell slightly to 2.24 per cent, against 2.27 per cent.

 

In the spot market, the Indian rupee depreciated to 86.66 during the day as foreign portfolio investors (FPIs) continued to buy dollars and month-end demand persisted. The rupee closed flat at 86.62 per dollar, against previous close of 86.61 per dollar.

 

Additionally, government bonds saw no inflows into the Bloomberg Index starting today, with the benchmark bond yield holding steady at 6.69 per cent.

 

“There was a month-end demand for dollars. The bond market was dull ahead of the Union Budget,” said the treasury head at a private bank.

 

Traders now eye the Budget for the financial year 2025-26 for significant cues. The government bond market expects that the Centre will continue its fiscal consolidation path in the upcoming Budget, with no significant changes expected in debt-related taxation policies.

 

FX reserves rise by $5 bn after 8 weeks of fall

 

After eight weeks of continuous fall, India’s foreign exchange (FX) reserves rose by $5.57 billion to $629.56 in the week ended January 24. The total reserves rose on the back of a rise in foreign currency assets, which increased by $4.3 billion during the week. Gold reserves were up by $704 million.