The total bids by foreign portfolio investors’ (FPIs) to acquire limits on government securities (G-Secs) stood less than the total amount put up for auction on Monday, according to information provided by market participants.
According to bond arrangers, FPIs put up bids worth R2,957 crore against R3,340 crore put up for auction. In the previous auction conducted on April 25, FPIs had bid R5,576 crore against a notified amount of R4,818 crore.
The highest bid that foreign investors were ready to pay to acquire these limits stood at one basis point against six basis points seen during the previous auction.
As far as the lowest limit is concerned, FPIs had to pay a nominal fee as cut-off, a bond arranger said. The number of bidders also fell to 33 from 57.
According to regulations, auctions are done when 90% of the investment limits in G-secs is utilised. As per the latest depository data, FPIs have utilised 97.56% of the total limit which currently stands at R1.4 lakh crore for all categories.
Market participants say Monday’s figures display a supply-demand mismatch, and not any negative sentiment.
Jayesh Mehta, MD and country treasurer, global market group at Bank of America, said: “This is mainly due to a good supply of G-secs quota along with a planned calendar for these auctions that give foreign investors a better foresight to plan their entry. Moreover, a few months down the line, the unutilised limits available for sovereign wealth funds will be merged with the open limit, thereby leading to a possible increase in supply. The fall in price of quota might be a function of these parameters and new FPI (are) still not entering,” Mehta points out.