12.25 Per Cent 2010 Yield At 10.52%

The Reserve Bank of India has set a cut-off price of Rs 110.60 underscoring an implicit yield of 10.5213 per cent for the Rs 6,900-crore price-based auction of 12.25 per cent government security maturing in 2010.

The auction devolved to the extent of Rs 514.50 crore on the central bank and to the extent of Rs 480 crore on primary dealers. The market had widely expected the auction to devolve onto the central bank. With the completion of this auction the central government has raised an amount of Rs 18,000 crore this fiscal as part of their large gross borrowing programme of Rs 1,16,861 crore. Of this, an amount Rs 17,000 crore has been raised via the auction of long-dated papers with the remainder being raised through sale of 364-day treasury bills.

The apex bank has increased the yield for similar tenors by 26 basis points in less than a month. The apex bank had auctioned the 12.29 per cent 10-year paper on April 11, 2000, with an implicit yield of 10.26 per cent, which was a drop of 173 basis points over the previous year's cut off yield of 11.99 per cent.

This auction had received a favourable response from the market which had resulted in RBI trying to lower the yields at the longer end by pushing the 20-year yield to 10.7 per cent. Devolvement to the extent of 86 per cent took place in this paper.

The central bank received 191 bids totalling Rs 5,993.50 crore of which it accepted a total of 170 bids worth Rs 5,005.50 crore at a cut-off price set at Rs 110.60. The issue devolved on the RBI to the extent of Rs 514.50 crore and on primary dealers to the extent of Rs 480 crore. The weighted average price was Rs 110.81, while the weighted average yield was 10.49 per cent.