The Reserve Bank of India (RBI), on Friday, was forced to concede higher yields to sell government debt totalling Rs.15,000 crore.
In all, it sold bonds with four maturity periods.
The shortest maturity bond on offer extracted higher yields from investors.
A bond with a coupon rate of 8.12 per cent and maturing in 2020 was sold at a cut-off yield of 8.67 per cent. The bond auction to raise Rs.3,000 crore devolved on the primary dealers to the extent of Rs.371.03 crore. Similarly, the sale of 8.32 per cent bond maturing in 2032 (for Rs.3,000 crore) also saw devolvement to the tune of Rs.959.25 crore at the cut-off yield of 8.57 per cent.
The Reserve Bank had to sell the 7.38 per cent bond maturing in 2015 (for Rs.2,000 crore) at a hefty yield of close to 9 per cent. The 8.2 per cent bonds maturing in 2025 to raise Rs.7,000 crore were sold at an yield of 8.46 per cent.
The RBI, however, did not get any bids at its special repo auction held on Friday for mutual funds. The RBI holds the special repo for banks at 10.25 per cent. Banks, in turn, are expected to lend to mutual funds. The special repo window for mutual funds is ostensibly intended to help mutual funds facing redemption pressures in the wake of the liquidity tightening measures by the RBI.
Come July 31, the Government of India will sell debt to the tune of Rs.12,000 crore through sale of treasury bills of 182-day and 91-day maturities. Twelve State Governments are also selling debt totalling Rs.10,497 crore by auctioning dated securities. By conceding higher yields in Friday’s auction of government bonds, the RBI reiterated its resolve to defend the rupee.
The rupee ended at 59.04/05 on Friday as against the previous close of 59.11/12. It traded at 58.69 intra-day. Thanks to series of measures by the RBI in the past couple of weeks, the rupee, which slipped to 61.21 a dollar on July 8, has recovered considerable ground since then.