Rbi Announces Three-Year Paper Auction To Mop Up Rs 3,000 Cr

The Reserve Bank of India (RBI) has announced the auction of a three-year paper on May 28 for raising Rs 3,000 crore.

The announcement of the auction follows the devolvement of Rs 986.98 crore at the sale of the five-year paper.

While the notified amount was Rs 3,000 crore at the five-year paper auction, the apex bank managed to raise only Rs 2,013.02 crore.

However, the new issue is likely to sail through as the call rates are showing signs of stabilising at around five per cent. Besides, the market appears to be in a good mood to relish short-dated papers.

 

But then, it will be the yield offered by the central bank that will determine whether the issue will be fully subscribed or not.

At present, the three-year paper is trading in around 12.15 per cent.

The yields on government papers have slipped following the yields on the 10-year paper falling by 60 basis point to 13.05 per cent.

Till date, the quantum of resources raised by the central government through issue of government papers is at Rs 11,000 crore.

The governments borrowing programme was kicked off with the auction of the 10-year paper for Rs 3,000 crore.

The government followed this up with a private placement of 10-year paper at a coupon of 13.05 per cent with the central bank and the auction of the five-year paper.

The Reserve Bank of India has also raised nearly Rs 5,000 crore at the auction of 364-treasury bills.

Calls seen below 5 per cent

The response at the repos auction held yesterday suggests that the call rates could come down to less than 5 per cent. The Reserve Bank of India (RBI) received 5 bids aggregating Rs 3,350 crore at the repos auction.

The central bank fixed the cut-off repos rate at 4.90 per cent and accepted 2 bids for Rs 1,250 crore.

If the banks did not expect the calls to come down to less than 5 per cent, they would not have put in their bids with the Reserve Bank of India.

The repos auction held no significance after the call rates went up to touch 9 per cent. In fact, at the last repos auction, the Reserve Bank did not receive any bids.