Government bond sales fail 2nd time in 2 weeks; no takers for Rs 4,037 cr bonds
Of the Rs 13,000-cr bonds the government wanted to sell, there were no takers for Rs 4,037 cr. These bonds were taken by primary dealers.
By ET Bureau | Updated:
MUMBAI: Bond sales of the Indian government failed for the second time in two weeks with investors seeking higher yields on government securities as they fear borrowing overshooting the revised target for the fiscal and inflation remaining elevated.
Of the Rs 13,000-crore bonds the government wanted to sell, there were no takers for Rs 4,037 crore. These bonds were taken by primary dealers who underwrite government bond sales.
“There is appetite for bonds, but investors are asking for higher yields now,” said Arvind Konar, head of fixed income, Almondz Securities. “Bond markets are still nervous because of the higher inflation data and the likelihood of government borrowing overshooting the targeted amount of Rs 52,800 crore by the end of the current financial year.”
RBI kept the cut-off yields at 8.78% for the 10-year bonds and 8.79% for bonds maturing in 2018.Of the Rs 6,000 crore worth of 10-year bonds, securities worth Rs 2,424 crore devoloved on primary dealers. And Rs 1,614 crore worth of the seven-year bonds were also unbid for by investors.
Last week, of the total bond issue of Rs 15,000 crore, the central bank devolved bonds worth Rs 6,000 crore on the primary dealers as bond dealers increasingly felt the pressure of weekly supplies of bonds after the government announced an additional market borrowing of Rs 52,800 crore in the coming quarters.
Indian government securities yields are at a near three-year high of 8.78% as investors believe that the government will keep borrowing more as its revenuesfall short of target due to slowdown in the economy. Also, the central bank is expected to keep raising policy rates to curb prices even if the growth rate is slowing.
The wholesale price index, a measure of inflation, rose 9.72% in September, where it is above 9% for more than a year, putting pressure on the central bank to keep interest rates high.
The yields on 10-year government bonds closed at 8.78% after the inflation numbers at almost double digits disappointed the markets, making a further case for a 25 basis points rate hike at RBI’s policy review on October 25.
“All eyes are on the RBI policy now and the market expectation is that RBI might raise rates again to tackle inflation,” said Anoop Verma, associate vicepresident at Development Credit Bank. This has been more or less factored into the yields.
“The Reserve Bank did not want to give a higher cut-off that markets were asking for. They preferred to devolve it on the primary dealers. The yields could be anywhere between 8.70% and 8.80% in the coming week,” he added.
Of the Rs 13,000-crore bonds the government wanted to sell, there were no takers for Rs 4,037 crore. These bonds were taken by primary dealers who underwrite government bond sales.
“There is appetite for bonds, but investors are asking for higher yields now,” said Arvind Konar, head of fixed income, Almondz Securities. “Bond markets are still nervous because of the higher inflation data and the likelihood of government borrowing overshooting the targeted amount of Rs 52,800 crore by the end of the current financial year.”
RBI kept the cut-off yields at 8.78% for the 10-year bonds and 8.79% for bonds maturing in 2018.Of the Rs 6,000 crore worth of 10-year bonds, securities worth Rs 2,424 crore devoloved on primary dealers. And Rs 1,614 crore worth of the seven-year bonds were also unbid for by investors.
Last week, of the total bond issue of Rs 15,000 crore, the central bank devolved bonds worth Rs 6,000 crore on the primary dealers as bond dealers increasingly felt the pressure of weekly supplies of bonds after the government announced an additional market borrowing of Rs 52,800 crore in the coming quarters.
Indian government securities yields are at a near three-year high of 8.78% as investors believe that the government will keep borrowing more as its revenuesfall short of target due to slowdown in the economy. Also, the central bank is expected to keep raising policy rates to curb prices even if the growth rate is slowing.
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The wholesale price index, a measure of inflation, rose 9.72% in September, where it is above 9% for more than a year, putting pressure on the central bank to keep interest rates high.
The yields on 10-year government bonds closed at 8.78% after the inflation numbers at almost double digits disappointed the markets, making a further case for a 25 basis points rate hike at RBI’s policy review on October 25.
“All eyes are on the RBI policy now and the market expectation is that RBI might raise rates again to tackle inflation,” said Anoop Verma, associate vicepresident at Development Credit Bank. This has been more or less factored into the yields.
“The Reserve Bank did not want to give a higher cut-off that markets were asking for. They preferred to devolve it on the primary dealers. The yields could be anywhere between 8.70% and 8.80% in the coming week,” he added.
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