After seeing four of its bond auctions partially remaining unsold, the Reserve Bank of India (RBI) managed to sell the entire stock of its Friday’s Rs 120 billion auction to the market.
The RBI, on behalf of the government, sold five bonds, including one fixed rate bond maturing in 2031, against which it raised Rs 40 billion.
Economic Affairs Secretary, Subhash Garg said in a televised press conference at New Delhi that the government may have misunderstood the market demand for certain set of maturities, and it may change the composition of bonds used to borrow the first half programme of Rs 2.88 trillion. However, the government is in no hurry to change the composition as of now and would wait for a few weeks to see the auctions, he said.
After having a discussion with market participants, the government had decided to introduce five-year and two-year bonds.
However, the market participants demanded higher yields (or lower value) for the five-year segment, which the central bank was not prepared to give. Primary dealers or underwriters of the bonds were forced to buy them. On Friday’s auction, the government raised Rs 10 billion from a two-year bond.
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