Omo Twin Auction Undersubscribed

The twin open market auction of Rs 8,000 crore government securities was undersubscribed today.

The Reserve Bank of India (RBI) received 136 bids worth Rs 4,505 crore for the Rs 2,000 crore 10.95 per cent paper maturing in 2011, while the 10.18 per cent 2026 paper witnessed 30 bids of Rs 540 crore.

The central bank accepted 47 bids of Rs 830 crore for the 10.95 per cent 2011 paper and 26 bids of Rs 520 crore for the 10.18 per cent 2026 paper.

The cut-off price for the 10-year was set at Rs 117 which is equivalent to an estimated yield of 8.32 per cent. For the paper maturing in 2026, the cut-off price was pegged at 112.50 which is equivalent to an estimated yield of 8.9172 per cent.

 

A dealer with a private sector bank said: "The rise in yields during the day signalled that there is liquidity shortage in the market and hence we expected that the auctions will not sail through."

Prices of government securities dropped by Rs 2-3 at the medium to long end today.

A primary dealer said that most of the dealers seem to bid a higher price and that's why even the full bid amount was no accepted.

"It implies that the RBI favours prices to fall more and yields to go down further," he added.