RBI gets robust bidding for 10-year GSec at auction

The Reserve Bank of India (RBI), on Friday, received robust bidding amounting to 4.8 times the notified amount of ₹10,000 crore at the auction of the new 10-year benchmark Government Security (GS). This GS, which is maturing in 2030 and carries 5.79 per cent coupon, got 466 bids aggregating ₹48,040 crore.

Given the robust robust bidding, the RBI exercised the green shoe option of ₹2000 crore for this security. What this means is that it allocated GS worth ₹12,000 crore against the notified amount of ₹10,000 crore.

RK Gurumurthy, Head-Treasury, Lakshmi Vilas Bank, said excess liquidity is driving down yields in the government security market, with the yield on the existing 10-year benchmark going down below 6 per cent.

The yield on the current 10 year benchmark GS (maturing in 2029 and carrying a coupon of 6.45 per cent) declined about 6 basis points and its price went up by 44 paise over the previous close. Bond yield and price move in opposite directions.

At the auction of the GS maturing in 2022 and carrying 5.09 per cent coupon, the RBI received bidding that was a whopping 6.81 times the notified amount of ₹3,000 crore. The number of bids was at 107. In the case of this security, too, the RBI exercised the green shoe option of ₹2,000 crore.

At the auction of the GS maturing in 2060 and carrying 7.19 per cent coupon, the RBI received bidding that was 3.79 times the notified amount of ₹6,000 crore. The number of bids was at 252 and the RBI accepted the bids for the notified amount.