15-Year Paper Auction Sails Through

The auction of 15-year paper for Rs 5000 crore received more than two hundred per cent of over subscription. The central bank received 435 competitive bids of Rs 16,056.504 crore. However, there were non-competitive bids of only Rs 148.276 crore against the Rs 250 crore slated to be allocated among the non-competitive bidders.

The central bank accepted 82 competitive bids of Rs 4,851.724 crore at a cut-off yield of 8.07 per cent. The weighted average of the bids received were 8.06 per cent. The cut-off yield was below the market expectation of 8.20-8.30 per cent.

This is for the first time the non-competitive bidders took part in the auction. The auction has completed Rs 1,21,000 crore of gross government borrowing as against the budgeted target of Rs 1,18,852 crore.

Money market dealers said that the ample liquidity in the system has helped the auction to get an overwhelming response. Said the treasury head of the private sector bank: "It was expected that the auction would get a good response as there is huge liquidity overhang in the system. However, the holiday in some part of the country has hampered the response from the non-competitive bidders."

Another dealer, however, said: "The poor response from the non-competitive bidders were partly due to the fact that hardly any individual took part in the auction. It will take another couple of auctions for the individuals to come for bidding in the primary auction."

Money market dealers were expecting the cut-off yield for the paper to be around 8.20-8.30 per cent. The yield of a similar maturity paper was around 8.23 per cent on Saturday. The auction was important because it will signal how the yields will move during the week.