Twin-Auction Likely To Sail Through

The twin-auction of Rs 8,000 crore, to be conducted tomorrow, is likely to be oversubscribed. While Rs 2,000 crore of 10.18 per cent 2026 paper is a reissue, Rs 6,000 crore of 2015 paper is a fresh issue.

Money market dealers said though the auction amount was the largest one in the current fiscal, market has enough liquidity to absorb the amount.

With these auctions, the Reserve Bank of India will complete Rs 95,500 crore (79.74 per cent) of the gross government borrowings of Rs 1,19,770 crore.

A dealer with a private sector bank said, "There is abundant liquidity in the system and the foreign exchange market is also stable. In such a situation, there should not be any problem with the subscription of both the papers."

The 10.18 per cent of 2026 paper was initially issued on September 10 when it was oversubscibed by 92 per cent. Dealers said the main subscribers were the insurance companies and nationalised banks.

They said the reissue may receive a similar response this time too. However, this time also, private sector banks and financial institutions may not be interested in such a long paper, they added.

Dealers expect the cut-off price of the paper in a range of Rs 101 to Rs 101.50 (equivalent to an yield of 10.01 per cent to 10.07 per cent). The yield-to-maturity of the paper closed at 10.11 per cent on Saturday.

For the 14-year paper, dealers are expecting the cut-off yield in the range of 9.78 per cent to 9.85 per cent. The yield-to-maturity of this paper in the secondary market was at 9.74 per cent on Saturday.

The government borrowings in the first-half of the current financial year has been higher at Rs 87,500 crore compared with to Rs 77,183 crore during the corresponding period of the last fiscal.

Analysts feel that, given the lower tax collection and the pump-priming policy of the Central government, the borrowing programme is likely to exceed the budgeted limit.