Twin Auction For Rs 7000 Crore Sails Through

The Rs 7,000 crore twin auction -- Rs 5,000 crore of 9.39 per cent 2011 and Rs 2,000 crore of 10.18 per cent 2026 -- received oversubcription to the tune 261.8 per cent.

In today's auction the central bank received total bids (competitive and non-competitive taken together) of Rs 18329.14 crore. With today's auction, 55.33 per cent (Rs 79,000 crore) of the central government's gross borrowing programme of Rs 1,42,779 crore is completed.

The central bank set the cut-off yield of the 9.39 per cent 2011 paper at 7.24 per cent and received subscription of Rs 6173.12 crore. The cut-off yield for the 10.18 per cent 2026 paper, which received subscription of Rs 6154 crore, was pegged at 7.9302 per cent.

According to the money market dealers both the cut-off yield was in line with the market expectation and hence the subscription to it was huge.

Said the treasury head of a private sector bank: "The yield was low what we expected and that is why the amount of subscription was quite good."

The sentiment in the government security market improved yesterday on the introduction of a new tax saving instrument carrying seven per cent interest rate. Moreover according to the indicative calendar for gilts auction, the RBI was expected to conduct auction of Rs 8,000 crore between August 1-6.

But the central bank reduced the amount to Rs 7,000 crore which also boosted the market sentiment. According to the dealers, both this helped the auction to receive good response.

Said a dealer with a nationalised bank: " Had the new tax saving instrument not been introduced, The auction of the long term paper (10.18 per cent 2026 paper) would receive devolvement."