Two More Gilts Put On The Sale Window
In line with the lower cut-off yield given at the auction on Wednesday, the Reserve Bank of India (RBI) is now offering on its sale window two papers issued this fiscal _ the 11.95 per cent 2004 and the 11.90 per cent 2007 _ at Rs 100.31 (or a yield of 11.87 per cent) and Rs 98.76 (12.13 per cent) respectively.
There was a wide gap of 20 basis points on the primary yield curve between the five-year paper (at 11.75 per cent given at the July 1 auction) and six-year paper (11.95 per cent). There will now be a greater alignment of yields between four-, five- and six-year gilts with the implied downward revision of the yield on six-year paper.
However, a section of the market feels the RBI has prematurely come out with offering six-year paper at a premium of 31 paise, based on the spurt in prices of the three- and four- year papers witnessed since the last auction. The 11.55 per cent 2001 was traded up to Rs 100.35 and the 11.68 per cent 2004 at Rs 100.15-20 soon after the auction on Wednesday.
"There were only a few big deals done at these levels, partly by primary dealers who had entered into prior commitments. We have to wait for another 2-3 days for the true secondary market yield to emerge," said a dealer.
"The fall in 3- and 4-year paper yields cannot be extrapolated to the six-year paper which is relatively less liquid," opined market players. In the secondary market, the six year stock is trading at around Rs 100.05, much below the RBI price. "If the idea is to offload this security which devolved to the extent of around Rs 960 crore on the RBI, it may not be able to do so immediately," he added.
As regards nine-year paper, which devolved almost entirely on the Reserve Bank at the auction, the yield offered is unlikely to generate any buying interest in the market, players said.
The 13.05 per cent 2007, which was earlier offered at Rs 104.69 (12.16 per cent), was more attractive, they added.
Among the other securities on the sale window, the RBI is offering the 6.5 per cent 2005 at Rs 74.11, the 6.75 per cent 2006 at Rs 73.75 and the 9 per cent 2013 at Rs 78.10.