9.39% 2011 Paper Oversubscribed

The auction of the Rs 5,000 crore worth 9.39 per cent government paper maturing in 2011 was oversubscribed by 61.34 per cent today.

The Reserve Bank of India (RBI) received 251 bids of Rs 8,067 crore of which it accepted 167 bids. The cut-off price for the auction was Rs 101.11, while the estimated yield was at 9.22 per cent.

The weighted average price of the bids accepted was Rs 101.18. The paper was dealt in the Rs 101.25-101.35 region.

With today's auction, the Central government has completed 58.44 per cent of its Rs 1,19,770 crore worth borrowing programme.

A dealer with a private sector bank said, "The market expected a higher cut-off price yesterday, but as the prices fell today, players bid at lower prices as well."

 

Dealers, however, said that the liquidity condition was good which helped the issue to be oversubscribed.

A chief dealer at a nationalised bank, "The auction outflows will be compensated by the inflows on account of coupon and redemption of government securities and hence there is no concern over that."

There will be an estimated inflow of Rs 6,000 crore in the rest of the week on account of coupon and redemption of government securities.

Dealers also pointed out that apart from the good liquidity situation, the maturity period of the paper also helped it to get a good response at the auction.

A dealer said, "Had it been a very long-term paper, there might not be such a good response as there is no appetite in the market for papers with more than 10-year maturity."

The central bank earlier announced a five-paise underwriting commission for primary dealers.