92% Of Eight Year Paper Devolves
The cut-off yield of the long dated paper at 11.40 per cent was in line with the market expectations. The Rs 100-crore 182-day treasury bill also devolved on the RBI fully.
"The coupon of the 8-year paper is in alignment with the market rates. Banks have shied away from the issue as they are finding the short-term repo window more attractive parking place for their funds at this point of time even though there is no comparison between repo and dated government security as instruments," said an analyst.
The secondary market yield of a comparable maturity paper was around 11.35 per cent.
The RBI took devolvement to the tune of Rs 1,270 crore while the devolvement on the primary dealers was Rs 1,489 crore taking the total devolvement close to 92 per cent.
The RBI hiked the underwriting commission for the primary dealers from 75 paise to 90 paise for the issue.
Reflecting the poor appetite of banks for long dated papers, there were only 51 bids for the security worth Rs 2,264 crore.
The RBI accepted nine bids worth Rs 250 crore. With the completion of the issue, the central bank has completed about 60 per cent of the Rs 1,17,000 crore gross borrowing programme of the government for the current fiscal.
Market players expected the cut-off rate for today's auction of eight-year government security to be in the range of 11.20 per cent to 11.45 per cent. This was the first long dated security to hit the market after a gap of one month. The RBI has been going slow in the government borrowing programme ever since the forex market has turned volatile.
The auction was of special significance as the appetite for long dated government paper has been on the wane.
The RBI has recently offered an option to the primary dealers for swapping option three long dated papers with the 364-treasury bills.
The last few auctions of long-dated papers have recorded huge devolvements on the primary dealers as well as the central bank itself.