KOLKATA, July 27 (Economic Times): The Reserve Bank of India (RBI) has
raised 80 per cent of what it intended in Friday's Rs 150-billion bond
auction as investors demanded higher yields after the central bank
managed to squeeze liquidity over the last fortnight to curb demand for
dollar and stem exchange rate volatility.
RBI has sold four government stocks with maturity ranging from two to 19 years, and raised Rs 118.66 billion with a small part of the bond auctions devolving on primary dealers, indicating that most of the market has accepted the new yield levels.
"The bond auctions were in line with expectation," said Samiran Chakraborty, Standard Chartered Bank's managing director and regional head of research for South Asia.
"Till last week, RBI was trying to fine-tune both liquidity and bond yields. This week, it has let the market find its own level."
The central bank set a cut-off yield of 8.9982 per cent for 2015 papers, significantly higher the coupon of 7.38 per cent, and accepted the full Rs 20 billion. The cut-off yield was 8.6747 per cent for the 8.12 per cent 2020 bonds, while it was 8.4629 per cent for 8.20 per cent 2025 stock. For the 8.32 per cent 2032 bonds, the cut-off yield was 8.5747 per cent.
"It was very clear that banks want higher return on their investment as there was no surplus liquidity in the system.
"The RBI has managed to squeeze liquidity and curb forex volatility as intended," said Care Ratings chief economist Madan Sabnavis. "I don't expect RBI to do anything more on Tuesday but its guidance will be critical for the market."
RBI has sold four government stocks with maturity ranging from two to 19 years, and raised Rs 118.66 billion with a small part of the bond auctions devolving on primary dealers, indicating that most of the market has accepted the new yield levels.
"The bond auctions were in line with expectation," said Samiran Chakraborty, Standard Chartered Bank's managing director and regional head of research for South Asia.
"Till last week, RBI was trying to fine-tune both liquidity and bond yields. This week, it has let the market find its own level."
The central bank set a cut-off yield of 8.9982 per cent for 2015 papers, significantly higher the coupon of 7.38 per cent, and accepted the full Rs 20 billion. The cut-off yield was 8.6747 per cent for the 8.12 per cent 2020 bonds, while it was 8.4629 per cent for 8.20 per cent 2025 stock. For the 8.32 per cent 2032 bonds, the cut-off yield was 8.5747 per cent.
"It was very clear that banks want higher return on their investment as there was no surplus liquidity in the system.
"The RBI has managed to squeeze liquidity and curb forex volatility as intended," said Care Ratings chief economist Madan Sabnavis. "I don't expect RBI to do anything more on Tuesday but its guidance will be critical for the market."
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