Rs 7,000 Crore Twin Auction On Friday

The Reserve Bank of India (RBI) will auction two government papers worth Rs 7,000 crore on Friday.

This is less than what the RBI was originally slated to raised (Rs 8,000 crore) from the market between August 1-6 as per the indicative calendar released by the apex bank.

The securities to be auctioned are 9.39 per cent 2011 paper for Rs 5,000 crore and 10.18 per cent 2026 paper for Rs 2,000 crore. With this auction, 55.33 per cent (Rs 79,000 crore) of the central government's gross borrowing programme of Rs 1,42,779 crore will be completed.

An RBI release said: "It may be recalled that as per the calendar for issuance of government securities, the notified amounts and the tenure of the securities for the auction scheduled for August 1-6, 2002 were Rs 6,000 crore for a security with tenure of 10 years and Rs 2,000 crore for a security with tenure of above 20 years. Taking into account all relevant factors, it has, however, been decided to issue the security for Rs 5,000 crore for reduced maturity of 9 years instead of Rs. 6,000 crore of 10 year maturity."

Money market dealers said that the lower than expected amount of the auction is due to the fact that the central government has already raised Rs 7,000 crore on July 17 through unscheduled auctions -- Rs 3,000 crore of 10-year paper with put and call option after five years and Rs 4,000 crore of 8.07 per cent 2017 paper.

Said the treasury head of a private sector bank: "After the twin auction on July, the central government's borrowing requirement might have come down and that is why they opted for a lower amount this time."

Both the papers are considered to be as semi-liquid papers. According to the dealers, while the nine-year paper is likely to receive good response, the 24-year paper may face devolvement.