FIIs put in bids worth Rs 34,840 crore to buy government bonds

MUMBAI: Demand for Indian debt remained buoyant as foreign investor bids for buying limits to invest in government bonds were oversubscribed by almost 20%, on expectation of higher yield returns.

"Given the expectation that interest rates could fall further, foreign funds looking for higher yields have found this to be a good time to subscribe for these bonds," said a senior dealer from STCI Primary Dealership.

Foreign investors, number of bidders being 50, put in bids worth Rs.34,840 crore to buy limits worth Rs.29,108 crore, according to sources in the know of the auction bidding.

Yields on Indian government bonds have already fallen by almost 92 basis points from April last year. One basis point is one hundredth of a percentage point. They closed at 7.75% on Monday, the lowest in three years.

According to the notifications issued by Securities Exchange Board of India and Reserve Bank of India in April, foreign investors will have to bid for buying investment limits in government bonds. But the market regulators have scraped the auction process in the corporate bonds category.

The unitilized investment limits in government bonds is auctioned every 20 thof the month to foreign investors, since the limits are almost fully subscribed by them. Though in the case of corporate bonds, almost 50% of the limits are unutilized currently.