Demand at Rs 33K crore weekly govt bond auction softer than expected

New 10-year bond expected next week

The demand at Rs.33000 crore weekly government bond auction was softer than expected, dealers said. The Reserve bank of India set the cut-off yield for the 7.06 per cent, 2028 bond at 7.16 per cent, for the 7.26%, and 2033 bond at 7.18 per cent, and for 7.30 per cent, 2053 bond at 7.38 per cent.

“The cut off yield was a little higher than the yield in the secondary market,” a dealer at a state-owned bank said. “The nationalised banks were the major bidders, and then there was some short covering.”

Typically, traders place short bets on the government bonds scheduled for auction to cover them at auction.

With Rs. 14,000 crore auction of the benchmark 10-year bond, the outstanding amount reached the key Rs. 1.5 trillion mark.

Dealers expect the issuance of a new 10-year government bond in the next few weeks. The government had offered to sell Rs.8,000 crore of the 7.06 per cent, 2028 bond; 14,000 bln crore of the 7.26 per cent, 2033 bond; and 11,000 crore of the 7.30 per cent, 2053 bond at the auction.

“Next to next week, we are expecting a new 10-year bond,” a dealer at a state-owned bank said. “Next week we might get a seven and 14 year bond.”