Debt market is buzzing ahead of budget

MUMBAI: Debt market is buzzing with a couple of regulatory moves a few days ahead of the Union Budget .

The Reserve Bank of India did not accept all bids at its scheduled government bond-sales on Friday as investor interest may have waned for long term bonds amid limited scope for interest rate cuts, dealers said.

The sovereign series, which will mature in 2034, received 80 investor bids for Rs 2,000 crore worth of bond-sale, show data from RBI. But, the central bank has accepted only nine bids retaining about one-third (or Rs 660 crore) of the sum.

The government bond-auction was aimed at raising Rs 11,000 crore by selling four series of bonds, but it fell short of selling Rs 1,324.7 crore worth of securities, show data from RBI.

In another move, the government has extinguished it short term repayment liability as it has issued long term bonds in lieu of papers maturing next financial year through a mechanism conducted by RBI. It is known as 'switch' in market parlance.

"The Reserve Bank of India, in consultation with the Government of India, has converted four securities from its portfolio maturing in 2017-18 having total face value of about ? 37,078 crore to longer tenor securities maturing in 2024-25 and 2029-30," the central bank said in a release on Friday.

"The switch should bring gross market borrowing to be announced in the Budget for next fiscal year," said a treasury head from a private bank. "This is yield-positive as the bond supply would be less next year."

The transaction has been conducted on January 25, 2017 at the Fixed Income Money Market and Derivatives Association of India (FIMMDA) prices.