The Reserve Bank of India (RBI) on Friday did not accept any bids at an auction of Rs 11,000 crore government securities maturing in 2026. These were part of the Rs 32,000-crore that were on offer on Friday in a highly watched auction amid the market’s demand for higher yields.
At the auction, for a notified amount of Rs 11,000 crore for the 5.63 per cent 2026 bond, though the central bank received bids for over Rs 38,747 crore, it did not accept any of the bids.
However, for over Rs 4,800 crore in floating rate bonds due in 2033, the cut-off was fixed at 4.93 per cent.
On the other hand, Rs 13,255 crore bonds (maturing in 2035) were sold at 6.72 per cent while a 2050 bond saw a cut-off yield of 6.8 per cent. The RBI managed to sell Rs 3,948 crore of these bonds.
The cancellation of auction of bonds worth Rs 11,000 crore indicates that the markets have continued to demand higher yields amid factors such as a slowdown in the economy, high Covid-19 cases and elevated inflation. However, yields on the benchmark 10 year security settled at 6.03 per cent against the previous close of 6.05 per cent.
While yields on the 10 year bond had inched up to 6.12 per cent despite the RBI announcing a government security acquisition programme, it has softened recently. Experts are of the view that it could trade in a range of 6-6.10 per cent.
As part of its monetary policy earlier this month, the RBI had announced G-SAP 1.0 programme, under which it will commit upfront to a specific amount of open market purchases of government securities with a view to enabling a stable and orderly evolution of the yield curve amidst comfortable liquidity conditions.
For the current quarter, it is looking to purchase Rs 1 lakh crore worth of bonds. On April 15, the central bank completed its first tranche of bond purchases under this programme of Rs 25,000 crore. However, the markets are looking for more support from the RBI.