4-Year Paper Cut-Off Seen At 11.70%

The cut-off yield at the auction of four-year Government of India paper for Rs 2,500 crore on Wednesday is expected to be in the 11.70-11.75 per cent range, said dealers in government securities.The enormous liquidity in the system has led market players to revise slightly downward their expectation on the cut off yield which the Reserve Bank of India (RBI) will set at the auction.

Those who were looking at an yield of 11.75 per cent last week are now talking about a cut off of 11.70 per cent for the four year paper, an yield at which the issue should sail through without a devolvement, said dealers.

The inflows that are expected on account of the Resurgent India Bonds floated by the State Bank of India should also see SBI in the role of a major bidder at this auction, said market players.

There is around Rs 5,203 crore locked up in the RBI repos and the inflows of Rs 3,200 crore last Friday leaves the system with abundant liquidity, even after the outflow at the auction.

This situation, coupled with the fact that more inflows are in the offing through Resurgent Bonds, should see a revival of interest in securities.