Market players buy 2030 G-Sec at a higher price in auction

Our Bureau Mumbai | Updated on April 30, 2021

The government, on Friday, raised ₹30,835 crore via auction of three government securities   -  MarcoMarchi

Yield fell 3 bps to 6.03 per cent

The government on Friday raised ₹30,835 crore via auction of three government securities (G-Secs) against the notified amount of ₹26,000 crore, with the sale of the benchmark 2030 G-Sec going through without any hitch. This triggered a mild rally in G-Sec prices in the secondary market.

Surprise rise in price

Surprisingly, market players bought the benchmark G-Sec at a higher price (weighted average price: ₹98.77) vis-a-vis the previous closing price (₹98.48).

It may be pertinent to note here that RBI had rejected all the bids for the 2030 G-Sec (coupon rate: 5.85 per cent) at the auction held on April 16 as market players wanted to buy it at lower than secondary market price.

‘Moral suasion angle’

“Given that nothing has changed overnight, this G-Sec started rallying since morning. It is rather surprising that market players (likely public sector banks) chose to buy the 2030 paper at a higher price. Probably, there is a moral suasion angle in this buy,” said an official with a primary dealer.

The 2030 paper closed up 22 paise at ₹98.70 (against previous close of ₹98.48), with the yield falling about 3 basis points to close at 6.03 per cent (6.06 per cent).

Published on April 30, 2021

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