FPIs debt limit auction sails smoothly amid higher demand

As per the enhancement for FPIs, RBI will be increasing the investment limit for government securities to Rs 1,79,500 cr by January 1

Foreign portfolio investors (FPIs)’ debt limit auction of government bonds sailed smoothly on Monday. While the demand was worth Rs 17,266 crore, the amount available for auction was Rs 5,600 crore.

The overall number of bidders was 88.

In the fourth bi-monthly monetary policy review held last month the Reserve Bank of India (RBI) enhanced the investment limits for FPIs. As per the enhancement for FPIs, RBI will be increasing the investment limit for government securities to Rs 1,79,500 crore by January 1 and it was earlier Rs 1,53,500 crore. Since the limits will be enhanced in two tranches every year, in between as on Monday the enhancement will be by Rs 1,66,500 crore for government securities.

Meanwhile, the yield on the 10-year benchmark government bond yield climbed the most in a month ahead of retail inflation data as the street was expecting a rise in the figure from a nine-month low. A rise in the prices of certain food items resulted in a higher retail inflation print in September after it had hit a record low in the previous month.

The yield on the 10-year bond rose to a two-week high of 7.58% compared with previous close of 7.55%. The yield had ended at 7.61% on September 29. Retail inflation rose to 4.41% in September from a revised 3.74 percent in August, data released on Monday showed.

In the fourth bi-monthly monetary policy review RBI had cut the repo rate by 50 basis points to 6.75%. The softening retail inflation had created room for the rate cut.