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The auction of government bonds (g-secs) for Foreign Institutional Investors (FIIs) sailed smoothly on Wednesday. The total demand was worth Rs 9,361 crore while the amount available for auction was Rs 7,152 crore.
The total number of bidders were 30. According to market sources the cutoff was higher than the earlier auctions but bidding was not as aggressive as expected towards the end of today's auction. The cut-off rate was 4.80 basis points while the highest bid was 8.50 basis points.
According to latest date from National Securities Depository Limited (NSDL) foreign investors had exhausted over 90% of the available limit of $ 20 billion in g-secs.
Meanwhile, g-sec yields fell for the first time in three days on optimism an auction of debt-purchase limits to foreign investors today will spur inflows into local securities. The yield on the 10-year benchmark bond ended at 8.54% compared with previous close of 8.56%.
"The debt-quota auction should be received well by overseas investors as inflows show they are bullish on India," said Sagar Shah, deputy vice-president for treasury at RBL Bank.
The 10-year bond rallied last week, with the yield slumping 13 basis points to 8.51%, after the central bank said it could ease policy should inflation slow more than anticipated.
The street is set to cheer the auction of the new 10-year benchmark g-sec which shall be done by RBI later this month. This is because the coupon rate of the bond may come as low as 8.25%.
