RBI delays auction results, extends bond market trading time by an hour

The Reserve Bank of India (RBI) extended the bond market trading time by an hour on Friday, as the auction results were released after 5 pm. Generally, the auction results are released after 2 pm and the bond market closes by 5 pm.

The RBI on last Friday too had extended the trading hours following a delayed release of auction results.

“Delaying of auction results is unusual, but it does happen. However, delaying auction results is avoidable as that sets the market rate for the day. The market gets confused and picks up wrong signals,” said a bond dealer.

The delay in auction results at a time when bond investors are undergoing stress is important because the RBI could be receiving fewer bids from investors initially, and large public sector institutions could be bailing out the auctions, said another bond dealer.

Devlovements, or bonds remaining unsold, are bad news for the market as well as for the borrower (government), as yields shoot up after such auctions.
 

One of the reasons could be that the central bank wanted to time the release of inflation and index of industrial production numbers on Friday. The RBI was not readily available for comments.

While not entirely unexpected, inflation in November surged to 5.2 per cent, while industrial production grew at 8.4 per cent.

Yields on the newly introduced 10-year bond were trading at 7.28 per cent at 5 pm, up from its Thursday's close of 7.26 per cent.

The RBI on Friday sold Rs 15,000 crore of bonds, fully subscribed, through its primary auction.