Despite good demand at the weekly auction of Government Securities (G-Secs), prices of these papers closed almost flat on Friday due to profit booking.
At the weekly auction of three papers – 7.17 per cent GS 2030, 7.41 per cent GS 2036 and 7.40 per cent GS 2062 – through which the government raised ₹31,000 crore, investors put in bids amounting to 2.75 times of this notified amount.
With the cut-off price for G-Secs coming in line with the prevailing market prices, there was a mild rally in the secondary market, which got dissipated due to profit selling.
Aditya Gore, Head - Fixed Income, Nuvama Wealth Management, said: “Inflation seems to be under control. RBI has paused…for all practical purposes, there is not going to be any rate hike from hereon. So, based on data, from the monetary policy side action is over.
“So, the debt market has started to focus on supply and demand at weekly G-Sec auctions. The auction expectations were only 3-4 paise lower than what has actually come. Some pension fund or EPFO or LIC might have deployed funds. Whenever this happens, the (price) cut-offs are better.”
For example, the seven-year paper (7.17 per cent GS 2030) was trading at about ₹100.87-100.89 when the auction closed. The cut-off came in at ₹100.88
“The cut-off was in line with overall market expectations. At the same time, primary dealers were expecting a cut-off of ₹100.80-100.85. Their expectation was of a tail of 6-7 paise, but that did not happen,” Gore said.
After the auction, the market went up only a couple of paise. There is nothing much to read into it, he added.
The cutoffs on 7.41 per cent GS 2036 and 7.40 per cent GS 2062 came in at ₹102.75 and ₹103.02, respectively, at the auction.
The widely traded 10-year benchmark paper (7.26 per cent GS 2033) closed almost flat at ₹101.735 (previous close: ₹101.745), with the closing yield being 7.0081 per cent (7.0068 per cent).