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The first weekly Government Securities (G-Sec) auction of the fiscal year 2022 (FY2022) devolved on primary dealers, triggering a sell-off in the secondary market, with yields of most G-Secs going up.
Of the four G-Secs put up for auction, the RBI devolved the bonds maturing in 2026 on PDs. Of the notified amount of ₹11,000 crore, PDs, who underwrite the auctions, had to absorb ₹10,926.29 crore worth of the paper. In the auction of other three papers — Government of India Floating Rate Bonds maturing in 2033 (notified amount: ₹4,000 crore), new G-Sec maturing in 2035 (₹10,000 crore) and 6.67 per cent G-Sec maturing in 2050 (₹7,000 crore) — the Government exercised the greenshoe option aggregating ₹5,853.23 crore.
Marzban Irani, CIO-Fixed Income, LIC Mutual Fund, said: “The government has done additional borrowing by exercising the greenshoe option. During the auction, most bidders would have sought a higher yield for the new G-Sec 2026. So, the RBI devolved this paper at 5.63 per cent. The market is trying to take the yields up, but they (RBI) are trying to bring the yields down. There is a tug-of-war,” Irani said. He observed that inflation data will be announced on Monday and the expectation is that G-Sec yields will drift higher. The exercise of the greenshoe option at the auction and the devolvement had their impact on the secondary market, with yields rising on most securities.
The yield on the G-Sec maturing in 2035 rose about 3 basis points to close at 6.5894 per cent.
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