Prices of Government Securities (G-Sec), especially short-tenor, rose on Friday as the government raised ₹10,000 crore less at the weekly auction of G-Secs.
Against the notified amount aggregating ₹32,000 crore, the government raised about ₹22,000 crore through auction of three G-Secs.
The Reserve Bank of India (RBI), however, rejected all the bids (329) aggregating ₹38,739.313 crore it received at the auction of the fourth G-Sec (five-year maturity; notified amount ₹11,000 crore).
Yield of the four-year G-Sec (coupon rate5.15 per cent) softened about 9 basis points to close at 5.4389 per cent, with its price rising 35 paise to close at ₹98.85.
Bond yield and price are inversely related and move in opposite directions.
Yield of the 10-year benchmark G-Sec (coupon rate: 5.85 per cent) thawed about 2 basis points to close at 6.035 per cent, with its price rising 11 paise to close at ₹98.66.
Market players are of the view that the government would have raised less because it has balances with the RBI. However, they cautioned that the thaw in yields will last only as long as the RBI supports the market through open market purchase of G-Secs, G-Sec acquisition plan.
At the auction of the floating rate bond (maturing in 2033) and four-year G-Sec (coupon rate 6.64 per cent), the RBI accepted bids amounting to ₹4,800.097 crore (notified amount ₹4,000 crore) and ₹13,255.648 crore (₹10,000 crore), respectively.
At the auction of the 49-year G-Sec (coupon rate 6.67 per cent), the RBI accepted partial amount of ₹3,948.282 crore (₹7,000 crore).