RBI rejects bids for 10-year bond at weekly bond auction

Last April RBI had similarly refused to sell the 10 year bond which led to fall in yields (AFP)Premium
Last April RBI had similarly refused to sell the 10 year bond which led to fall in yields (AFP)
 2 min read . Updated: 14 May 2021, 09:00 PM IST Gopika Gopakumar

Bond dealers say RBI cancelled the auction of 10 year bond as it did not accept the yield which was quoted by the market participants

The Reserve Bank of India has rejected all bids for the 5.85% 2030 bond at a weekly bond auction, sending yields lower. The yield on benchmark 10-year government bonds fell by 2 basis points to 5.99%.

RBI sold ₹12,200 crore of bonds, less than the ₹26,000 crore planned. It sold ₹3090 crore of new 2023 bonds at a cut off yield of 4.26% versus the estimated 4.34%. The central also sold ₹9117 crore of 6.76% 2061 bond at a cutoff yield of 6.8740% vs. 6.82% estimated.

MORE FROM THIS SECTIONSee All

Bond dealers say RBI cancelled the auction of 10 year bond as it did not accept the yield which was quoted by the market participants.

“The 10 year bond was quoting at around 6.035% in the morning. Since it was a large amount, RBI didn’t want to sell the bond at a high yield. If they had devolved, then the underwriters would have sold at a higher yield, which would have sent out a signal that RBI is fine with higher yield," said treasury head of a bank.

Last April RBI had similarly refused to sell the 10 year bond which led to fall in yields. At that time primary dealers had shorted the 10 year bond in order to cover it ahead of the auction. This short-selling involved borrowing a security and selling it in the market, hoping to buy it back at a lower price later. However market participants were taken unawares when RBI decided to cancel the auction instead of devolving on the primary dealers, thereby cooling off the yield

On May 20 the second tranche of Government securities acquisition programme of ₹35,000 crore is planned where RBI will purchase government securities from the secondary bond market. RBI has announced GSAP of ₹1 trillion of which ₹25,000 crore has been done so far.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!

Close