Bond yields fell for a second session on Wednesday on hopes of strong demand from foreign investors at an auction to sell new debt limits.
Capital markets regulator will sell $5 billion of limits to foreign investors after the government raised the ceiling for foreigners to invest in government paper to $20 billion. The additional limit can be invested in papers that have a residual maturity of at least three years.
The increase in debt limits was part of the government’s efforts announced in June to prop up the rupee and revive investor sentiment in the economy. “Limits are available to foreign investors at very cheap prices so it’s likely there will be demand,” said a trader with a primary dealership.
The most traded 9.15 per cent 2024 bond fell three basis points to 8.38 per cent while the 10-year bond fell three basis points to 8.33 per cent during the session. The benchmark 10-year bond ended two basis points lower at 8.16 per cent.
Call rates improve further
Call money rate ended lower at the overnight call money market here on Wednesday due to lack of demand from borrowing banks amidst ample liquidity in the banking system. The overnight rate finished lower at 7.05 per cent from last close of eight per cent. It moved in a range of 8.3 per cent and 7.05 per cent.
The Reserve Bank of India under the Liquidity Adjustment Facility purchased securities worth Rs 48,365 crore in 30 bids at the one-day repo auction at a fixed rate of eight per cent and sold securities worth Rs 890 crore from two bids at the one-day reverse repo auction at a fixed rate of seven per cent.