Money & Banking

RBI devolves 10-year G-Sec auction

Our Bureau Mumbai | Updated on July 23, 2021

80% of notified amount devolved on primary dealers

The Reserve Bank of India (RBI) devolved the recently issued 10-year government security (G-Sec) on primary dealers (PDs) to the tune of 80 per cent of the notified amount at the weekly auction held on Friday as bidders wanted to the buy the paper at a lower price vis-a-vis the prevailing market price.

By devolving the paper on the PDs, the central bank is trying to keep the G-Sec yields in check. Bond price and yields are inversely related and move in opposite directions.

At the auction, PDs had to pick up the GS 2031 aggregating ₹11,144.145 crore against the notified amount of ₹14,000 crore.

The cut-off price for the paper came in at ₹99.63 (versus the previous close of ₹99.7225). Cut-off yield was at 6.1498 per cent (6.1373 per cent).

In the secondary market, price of the aforementioned G-Sec closed about 20 paise lower at ₹99.52 vis-a-vis the previous close. Its yield rose about 3 basis points to close at 6.1648 per cent.

The auction of the other two papers — 4.26 per cent GS 2023 (notified amount: ₹3,000 crore, with greenshoe amount of ₹750 crore being accepted) and 6.76 per cent GS 2061 (₹9,000 crore, with greenshoe amount of ₹2,250 crore being accepted).

PDs play vital role

Madan Sabnavis, Chief Economist, CARE Ratings, observed that the G-Sec auctions on Friday followed the familiar path of PDs playing an important role in subscribing to the offerings.

“We can see that the 10-year yield has been crawling up over the weeks and while the RBI did manage the yield curve and keep the rate at around 6 per cent, the market has been demanding a higher return. The average cost for these three papers is 6.28 per cent,” he said.

Sabnavis noted that there will be one more auction next week before the Monetary Policy Committee meets and the market is awaiting the tone of the discourse.

Published on July 23, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like