Discount Deals In 11.75% Gilt

The new eight-year paper, the 11.75 per cent 2006, saw heavy trades totalling Rs 1399.995 crore out of a total volume of Rs 1,633.205 crore transacted yesterday. Of this, trades worth Rs 1121.20 crore were at a discount.

Primary dealers and satellite dealers, who took a devolvement of Rs 2,354.40 crore at the auction, have been offloading the security. The primary dealers and satellite dealers were entitled to an underwriting commission of 69 paise for every Rs 100 underwritten by them.

Hence, any price in the secondary market above Rs 99.31 gives an opportunity for the dealers to get out of the security at a profit. Primary dealers and satellite dealers preferred a devolvement to having bid successfully at the auction.

The heavy sale of the new security is also because the cut off of 11.75 per cent itself was lower than market expectations. Most of the deals yesterday were done at yields in the region of 11.80 per cent.

At the auction, against the notified amount of Rs 4,000 crore, RBI received 215 bids for a sum of Rs 4892.76 crore. At the cut off yield of 11.75 per cent, 68 bids for a sum of Rs 1645.60 crore were accepted. The weighted average yield was 11.74 per cent. The devolvement was despite surplus funds being parked with RBI through repos.