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Price of the benchmark 10-year Government Security (G-Sec) declined by about 70 basis points, with its yield rising about 10 basis points, as two of the four G-Secs devolved on primary dealers (PDs) at the auction held on Thursday.
The central bank devolved about 97 per cent of the notified amount of ₹11,000 crore at the auction of the 2025 G-Sec (coupon rate: 5.15 per cent).
It also devolved about 99 per cent of the notified amount of ₹11,000 crore at the auction of the 2030 G-Sec (coupon rate: 5.85 per cent).
PDs’ bid to underwrite various amounts in G-Sec auctions at different commission rates. Market players say the RBI agreed to pay a relatively higher commission for PDs at Thursday’s auction, and the devolvement of the two aforementioned G-Secs on them should be seen in this context.
In the case of auction of the 2022 G-Sec (3.96 per cent), the RBI accepted a greenshoe amount of ₹145.052 crore over and above the notified amount of ₹2,000 crore.
In the case of auction of the 2061 G-Sec (new issuance), the RBI accepted partial amount of ₹3,501.335 crore against the notified amount of ₹7,000 crore.
“Devolvement on PDs and fatigue in the market (about over supply of G-Secs) are the main reasons why yields went up today,” said Marzban Irani, CIO-Fixed Income, LIC Mutual Fund.
Irani observed that yields may nudge up next week as PDs will start selling the G-Secs that devolved on them. The Bond market is closed on Friday on account of Chhatrapati Shivaji Maharaj Jayanti.
In the secondary market, price of the 10-year benchmark (2030/ 5.85 per cent coupon) G-Sec fell 73 paise to ₹97.94 over the previous close, with its yield going up about 10 basis points to 6.1318 per cent.