RBI buys back Rs 10,000 crore bonds

The government has decided to buyback a series of sovereign bonds, at least two months earlier than the scheduled maturity in January next year, a move that reflects a comfortable cash balance with the centre.

The bonds, which offered 6.25% rate will be re-purchased through reverse auction for an aggregate amount of Rs 10,000 crore, the Reserve Bank of India said in a notification issued on Thursday. The proposed electronic auction will take place on next Monday.

“The repurchase by the government of India will be undertaken to redeem prematurely the government stocks by utilizing surplus cash balances. The above repurchase of the Government Stocks is purely ad hoc in nature.”

This means, the government has now a comfortable cash balance, which it can use to repay bond holders. Maybe, it may not have the same in January, dealers said.

“The government may be cash surplus after tax collections,” said Piyush Wadhwa, head of rates trading at IDFC Bank. “They are using it repay their liability early. This is a positive sign for the debt market as it shows fiscal prudence.”

The securities were probably sold in 2008, and the latest stock would be about Rs 16,000-17,000 crore.