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The Government Securities (G-Secs) market rallied on Tuesday as the Reserve Bank of India (RBI) cancelled the scheduled weekly G-Sec auction.
The cancellation of the auction perked up market sentiment, with the yield of the newly issued 10-year benchmark G-Sec (coupon rate: 6.54 per cent) softening about 7 basis points to close at 6.8092 per cent (previous close: 6.8789 per cent).
Price of the aforementioned paper jumped 49 paise to close at ₹98.0725 (previous close: 97.5825).
Bond yields and prices are inversely related.
Dwijendra Srivastava, Chief Investment Officer - Debt, Sundaram MF, observed the rally is only a technical pullback.
“How many auctions can the RBI cancel?” he said, adding that oversupply of G-Secs coupled with central banks of developed markets embarking on a rate tightening cycle and rising global crude oil prices will take the domestic yields up.
Yield of the erstwhile 10-year benchmark G-Sec (coupon rate: 6.10 per cent) thawed about 7 basis points to close at 6.8324 per cent (previous close: 6.8992per cent).
Price of the aforementioned paper rose about 45 paise to close at ₹94.9650 (previous close: 94.52).
The Reserve Bank of India (RBI), in a statement, late on Monday, said on a review of the cash balance position of the Government of India (GoI), it has decided, in consultation with GoI, to cancel the auction of all the securities scheduled to be held on February 11.
Madan Sabnavis, Chief Economist, Bank of Baroda, said, “This week’s central government’s auction of ₹24,000 crore of government securities has been cancelled as the cash position appears to be steady obviating the need for such borrowing.
“The markets will be waiting for the RBI policy on the 10th for further direction,” he added.
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