The government has decided to cancel the last weekly Government Securities (G-Secs) auction of FY21, aggregating ₹20,000 crore. This could soften G-Sec yields in the run-up to the close of the fourth quarter and the financial year.

“As per the revised Issuance Calendar dated February 1, 2021, for Government of India-dated securities, the next auction is scheduled to be held on March 26, 2021.

“On review of position of cash balance, the Government of India has decided to cancel the above scheduled auction,” said the Reserve Bank of India (RBI) in a statement.

Direct tax collection

Last Thursday, BusinessLine had reported about the possibility of cancellation of the last weekly G-Sec auction of FY21 on rising expectations that the overall direct tax collection may exceed the revised target.

Softening of G-Sec yields due to cancellation of the auction could have a salubrious effect on valuation of bond portfolio of banks, said Marzban Irani, CIO-Fixed Income, LIC Mutual Fund.

The 10-year benchmark G-Sec (carrying 5.85 per cent coupon rate) thawed about a basis point to close at 6.1801 per cent (previous close: 6.1927 per cent), with its price moving up by 9 paise to close at ₹97.61 (₹97.52).

The 15-year G-Sec (6.22 per cent) softened 3 basis points to close at 6.7345 per cent (6.7673 per cent), with its price rising by about 28 paise to close at ₹95.3850 (₹95.10).

Bond yield and price are inversely related, moving in opposite directions.

CARE Ratings, in a report last Friday, said the Central government raised ₹33,000 crore in its scheduled weekly auction for the week ended March 19, 2021, which is ₹4,000 crore more than the notified amount and ₹8,767 crore more than the previous week.

“This is the second consecutive auction wherein no bids were devolved to the primary dealers,” said Sushant Hede, Associate Economist, in the report.

Related Topics
comment COMMENT NOW