Govt Paper Sale Gets Huge Response

The open market sale of 11.03 per cent 2012 government security was concluded in 15 minutes flat today. The overwhelming response is a reflection of the liquidity overhang in the system.

Bids worth over Rs 7,400 crore poured in for the notified amount of Rs 4,000 crore, mainly from the nationalised banks and the insurance companies.

Both do not have any other means of deploying their funds with credit offtake having been tardy this year so far. Non-food credit offtake this year has dropped by Rs 2,129 crore.

In contrast, the investment portfolio registered a growth of Rs 28,433 crore in the first two months of the current fiscal. Dealers said that the oversubscription was in line with the recent trend in the government security market, where the yields are touching new lows everyday. The 10-year paper fell to 9.56 per cent today.

 

With liquidity sloshing around in the system, interest rates on all money market instruments are heading southwards.