Money & Banking

G-Sec yields rise as RBI devolves three securities

BL Mumbai Bureau | | | Updated on: Dec 25, 2021

4th G-Sec auction raised ₹7,000 crore

Government Securities yields moved up on Friday as the Reserve Bank of India devolved three out of four securities on primary dealers (PDs) at the weekly auction in the backdrop of upward pressure on yields.

PDs had to pick up the three G-Secs — 4.56 per cent (coupon rate) GS 2023, 5.74 per cent GS 2026, and 6.67 per cent GS 2035 — accounting for 42.75 per cent (₹7,268 crore) of the aggregate notified amount of ₹17,000 crore raised through auction.

RBI devolves G-Sec auctions, either partially or fully, on PDs when the bids are not in line with the prevailing yields.

Also see: RBI extends tokenisation deadline by 6 months

Market players want to buy G-Secs at lower price or higher yield. However, the RBI, in its role as debt manager to the government, tries to keep the yields on a tight leash to limit the government’s cost of borrowing.

This comes in the wake of yields in the secondary market rising ever since the US Fed signalled a hawkish stance and RBI has stepped up VRRR auctions to suck out surplus liquidity from the banking system.

The auction of the fourth G-Sec (6.99 per cent GS 2051) sailed through, with the government mopping up ₹7,000 crore.

The auction devolvement had its impact on the secondary market, with the yield on the widely traded 6.67 per cent GS 2035 rising about 2 basis points to close at 6.8992 per cent and its price falling about 19 paise to close at ₹97.9625.

Also see: ‘Overall recovery rate under IBC improved till March-end 2021’

The yield and price of the 10-year benchmark G-Sec (6.10 per cent GS 2031) hardly moved as the government has raised almost ₹1.50-lakh crore via this security and the RBI is expected to issue a new 10-year benchmark.

Rupee rises

Meanwhile, the rupee closed about 24 paise stronger at 75.03 per dollar, a three-week high.

This comes amid continued optimism among investors that the global economic recovery remained on track despite Omicron variant-led surge in Covid-19 infections, IFA Global said in a report.

The report noted that sentiment for riskier assets, including the Indian rupee, improved after data from a new laboratory study showed that AstraZeneca’s Vaxzevria vaccine significantly boosted levels of antibodies against the Omicron variant following a third booster dose.

Published on December 24, 2021
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