Surplus liquidity in the banking system led to a cut-off yield of 6.51 per cent for the 9.39 per cent 2011 government paper at the auction held here today. | |
| The 7.50 per cent 2034 paper, which too was auctioned today, saw a cut-off yield of 7.10 per cent -- a bit higher than the market expectation. |
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| The Reserve Bank of India (RBI) received competitive bids worth Rs 17,223 crore for the 2011 paper of which it accepted bids worth Rs 4,936 crore. It also accepted another Rs 64 crore worth of non-competitive bids. |
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| According to dealers,while the 2011 paper was subscribed by major banks and primary dealers, the 2034 stock was lapped up by provident funds and trusts. |
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| Meantime, the RBI received reverse repo bids worth Rs 40,640 crore today. |
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| This is because the market is awash with liquidity following an inflow of Rs 10,000 crore through the special deposit scheme and another Rs 10,000 crore from the closure of the government deposit scheme for central government undertakings. |
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| Also, central government expenditure has not been substantial of late, given the credit of around Rs 40,000 crores maintained with the RBI. |
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| Reuters adds: Earlier, yields fell for a second day in a row on Tuesday as cash surpluses with investors rose, while easier oil prices raised expectations of taming inflation. |
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| Traders said the robust response to the government's bond auctions, announced after the close of trade, would ensure that the market open Wednesday on a buoyant note, with the benchmark 10-year yield sliding another 5-7 basis points. |
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| "Market sentiment is very good and people are targeting the 10-year yield at 6.40 per cent," said a trader at a state-run bank. |
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| "Money market liquidity has improved and is expected to remain comfortable at least for this quarter. The falling trend in crude will also help bring the inflation rate lower." |
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