The Reserve Bank of India has announced a yield of 12.3 per cent on the 10 year market loans of 13 state governments for 1997-98. The yield has surprised the money and securities markets as it is substantially higher than the secondary maket yield on ten year paper which is below 12 per cent. The 13.05 (Maharashtra SDL) 2007 paper, for instance, closed at 11.77 per cent, as per the statutory general ledger maintained with the RBI.
The auction is to be held on October 6 for an aggregate amount of Rs 2,367.56 crore. When the auction was announced in the fag end of the days trading, yields on securities which were moving upward on account of lack of demand from banks, moved up further. The most actively traded paper, the 12.59 2004, saw its yield up by 20 basis points during the day to close at around 11.57 per cent.
Overnight call rates were impacted by outflows under advance tax payments. Of the Rs 5,000 to Rs 6,000 crore payment that is to be made, one tranche was paid yesterday. As a result, the call rates which opened at around 8.5 per cent moved up to 9.5 per cent.
In line with call movements, securities prices which went up by around 30 paise, fell by 25 paise. The yields which were strengthening as a result, strengthened further following the RBIs announcement.
The 12.59 per cent 2004 paper opened at Rs 104.45-50, then moved up to Rs 104.75-80 and again closed at 104.50. The other actively traded paper, the 12.14 per cent year 2000 paper opened at 103.75-85 and closed at Rs 102.7 paise.
