Why investors are worried over RBI bond auctions for this week
The announcement came a day later than its routine schedule. This stirred up speculations among traders or investors delving deep to define the delay.
By Saikat Das, ET Bureau |
MUMBAI: The Reserve Bank of India Tuesday has announced its weekly government bond sales ending a day’s market speculations as it introduced the new benchmark bond, up for auction next Friday.
The announcement came a day later than its routine schedule. This stirred up speculations among traders or investors delving deep to define the delay.
“The one day delay caused uncertainties in the markets,” said Badrish Kulhalli, fund manager, fixed income, HDFC Life Insurance. “Investors were not seen taking fresh positions. The new benchmark will lift sentiment in the gsec markets as investors across the board would be keen to buy those.”
“Larger size of issuances will also help meet the strong demand for the paper,” he said.
Markets were agog with the buzz that RBI was in an extended talks with the government to finalise the size the new 10-year benchmark bonds. In the When Issued market, an RBI platform for price discovery without settlement, it new benchmark traded at about 7.72% compared with 7.86% yield in the incumbent benchmark.
RBI proposed to sell the new paper for Rs 9,000 crore versus Rs 7,000 crore expected. Total auction size is at Rs 16,000 crore including papers with different maturities.
“We expect the new 10 year should be close to signalling rate backed by the expectation of further cut in coming days,” said Said Soumyajit Niyogi, interest rate strategist, SBI DFHI Primary Dealership. “Expected introduction of new 10 year shall restore optimism in the overall market.”
Dealers expect the final yield in then range of 7.65-7.70% for the new security.
The announcement came a day later than its routine schedule. This stirred up speculations among traders or investors delving deep to define the delay.
“The one day delay caused uncertainties in the markets,” said Badrish Kulhalli, fund manager, fixed income, HDFC Life Insurance. “Investors were not seen taking fresh positions. The new benchmark will lift sentiment in the gsec markets as investors across the board would be keen to buy those.”
“Larger size of issuances will also help meet the strong demand for the paper,” he said.
Markets were agog with the buzz that RBI was in an extended talks with the government to finalise the size the new 10-year benchmark bonds. In the When Issued market, an RBI platform for price discovery without settlement, it new benchmark traded at about 7.72% compared with 7.86% yield in the incumbent benchmark.
RBI proposed to sell the new paper for Rs 9,000 crore versus Rs 7,000 crore expected. Total auction size is at Rs 16,000 crore including papers with different maturities.
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“We expect the new 10 year should be close to signalling rate backed by the expectation of further cut in coming days,” said Said Soumyajit Niyogi, interest rate strategist, SBI DFHI Primary Dealership. “Expected introduction of new 10 year shall restore optimism in the overall market.”
Dealers expect the final yield in then range of 7.65-7.70% for the new security.
Since December later year, RBI has been auctioning the government’s cash balances to banks, which is a kind of lending window to lenders. Its outstanding now is at about Rs 90,000 crore, suggesting the government’s comfortable cash positions.
Although the latest exact cash balance is not yet known but it looks, it will be higher than Rs 90,000 crore, said a dealer from a primary dealership company.
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