India debt limit auction attracts tepid demand

On investment restrictions in the auctioned limits and because of thin participation by some investors

India's debt limit auction on Wednesday met tepid investor response due to investment restrictions in the auctioned limits and because of thin participation by some investors on account of a U.S. holiday.

The Securities and Exchange Board of India (SEBI) conducted the special auction to allocate the enhanced Rs 28,496 crore limit in long-term sovereign bonds with a residual maturity of a minimum of three years.

Additionally, it auctioned Rs 31,387 crore of long-term corporate bond infrastructure limits, with a one year lock-in period and residual maturity of 15 months.

The cut-offs for both government bonds and the corporate debt limits were 0.0001 percent.

The limits were cheaply priced because they can only be used once.

"Demand was moderate for government bond limits as the quantum on offer was very high," said Arvind Chari, a fixed income fund manager at Quantum AMC.

"Some investors bid to take up the limits as they came cheap, but the actual inflow into bonds might not be very high now," Chari said.

As of June 15, only Rs 17,998 crore of the existing long-term government bonds limits have been utilised against $5 billion available.

The demand was lacklustre for corporate bond infrastructure limits as the lock-in period has limited interest, traders said.