Rs 7000 Crore Auction Of Long Papers Tomorrow

Two long-dated papers will be auctioned on Saturday to mop up Rs 7,000 crore from the system flush with liquidity.

The Reserve Bank of India (RBI) will conduct twin auction of 9.81 per cent 2013 (Rs 4,000 crore) and 10.25 per cent 2021 (Rs 3,000 crore) paper on Saturday.

The auction will complete around 54 per cent of the gross government borrowing programme of Rs 1,19,970 crore for the current fiscal.

It is one of the rare occasions when the RBI is auctioning a 20-year paper. However, it may not face any hiccup as banks and insurance companies have appetite for such a long-dated papers, dealers said.

The market has been expecting the auction. The huge redemptions of Rs 7,400 crore earlier in the week has probably put pressure on the government to raise fresh money from the market, the dealers said.

Both the auction is likely to go through successfully on the back of ample liquidity in the system. The comfortable liquidity in the market was reflected in the bid amount in the one-day repo auctions.

The central bank received Rs 10,000 crore and Rs 11,780 crore in the repo auction in the last two days, of which it accepted Rs 6,000 crore, respectively.

The government security prices rallied today by 35-45 paise across different maturities due comfortable liquidity and rupee's recovery against the greenback.

Sentiment also improved since yesterday after RBI governor's statement that the government is unlikely to cross the budgeted borrowing programme.