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Sentiment in the Government securities market continues to be bearish with market players bidding for the securities at a steeper discount to the face value at the auction.
The benchmark 10-year security, which carries a coupon of 7.16 per cent, was sold to market players at a lower price of Rs 93 (against Rs 94 at the previous auction) against the face value of Rs 100. The yield-to-maturity or YTM (the rate of return anticipated on a bond if it is held until the maturity date) rose to 8.21 per cent against 8.05 per cent at the previous auction.
With the central bank introducing steps to drain rupee liquidity, which has pushed up short-term interest rates in the money markets, to curb speculation in the foreign exchange market, the drift in the market is that interest rates are headed north.
The Government raised Rs 12,067 crore through auction of four G-Secs of six, 10, 19 and 22 years maturity on Friday. The Government had planned to raise Rs 15,000 crore through the auction. According to S. Srinivasaraghavan, Head-Treasury, Dhanalaxmi Bank, instead of borrowing at a higher cost, the Government should have made a private placement of the G-Secs with the RBI.
Two securities, the six and 19 years, devolved on primary dealers (entities who underwrite the auction) for amounts aggregating to Rs 515.94 crore and Rs 430.82 crore, respectively.
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