The cut-off yield on the new 10-year benchmark bonds maturing in 2026 has come in at 7.59%, according to the data published by the Reserve Bank of India (RBI) on Friday.
Market participants were expecting the cut-off yield close to 7.60% considering the fact that the security was trading close to 7.58% on the ‘when issued’ market on Thursday.
The total bids stood at Rs 28,837 crore, against a notified amount of Rs 8,000 crore on the new benchmark bonds. Interestingly, the bids came in at 3.68 times the amount put up for auction — roughly the same figure seen during the introduction of the new benchmark bond in May 2015.
Last year, total bids on the new benchmark bonds stood at Rs 33,122.76 crore, against the notified amount of
Rs 9,000 crore.
Ashish Jalan, assistant vice-president at SPA Securities, believes that the cut-off on the new benchmark bond reflects that demand has been good despite volatility in the markets. “I think the yield has come in at reasonable levels considering that the 7.72% yielding benchmark bond was trading close to 7.74%,” Jalan said.
Every time a new ten-year bond is introduced, market participants aggressively bid for the security considering it becomes the latest benchmark and is used as a proxy for pricing many debt instruments.
The other three securities that were auctioned along with the new benchmark have also seen reasonable response.
The 7.68% bonds maturing in 2023 saw bids worth Rs 8,795.50 crore against the notified amount of Rs 2,000 crore.
The 7.73% bonds maturing in 2034 witnessed bids worth Rs 8,528.50 crore against the notified amount of Rs 2,000 crore.
Only the 40-year bond saw relatively weaker response with the 7.72% bonds maturing in 2055 witnessing bids worth Rs 5,143 crore against the notified amount of Rs 2,000 crore.
The 7.72% bond maturing in 2025 which is used as the benchmark so far closed at 7.74% on Friday, almost flat from Thursday’s closing.