11.68% Cut-Off Seen At Rs 107.7

A majority of respondents in a poll conducted ahead of the forthcoming bond auction feel the cut-off price of the 11.10 per cent 2003 paper will be greater than Rs 104.05. This translates into an implicit cut-off yield of less than 9.46 per cent.

Many of them also felt that the cut-off price for the 11.68 per cent 2006 would be between Rs 107.70 and Rs 107.80, which translates into an implicit cut-off yield range of 9.90-9.92 per cent.

The poll was conducted by Credence, a research firm.

The Reserve Bank of India (RBI) is to reissue Rs 2,500 crore each worth of both securities on May 15.

Most dealers feel the auction is likely to sail through with little or no devolvement as both securities are for short-term maturities.

Following the auction, 18.83 per cent of the total amount of gross borrowing for the year will have been completed.

Most of the activity in the securities market has been concentrated in the short- and medium-term maturities and dealers say that the central bank has taken advantage of this bullishness.

The previous two auctions were both in the longer maturities (2010 and 2020) and both saw large devolvements onto the RBI and onto primary dealers.

Sentiment in the longer end of the market has been dull for sometime now and dealers say that any further auctions in those maturities would have probably devolved.

The 11.10 per cent 2003 paper was first issued on April 7, 1998 for a notified amount of Rs 4,000 crore with no subsequent reissues.

The 11.68 per cent 2006 paper was first issued on April 10, 1999 for a notified amount of Rs 3,000 crore and was subsequently reissued on November 24, 1999 for a notified amount of Rs 2,000 crore.