RBIís Rs 12,000 crore bond sale target nets only a fifth in bids

Jul 19 2013, 01:04 IST
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SummaryThe RBI had received bids worth Rs 24,279.2 crore

After rejecting the Treasury Bill auction on Wednesday, the Reserve Bank of India (RBI) on Thursday sucked out only Rs 2,532 crore, which is about a fifth of the Rs 12,000 crore that it planned to drain out through sale of government securities under its open market operations (OMO).

The Rs 12,000 crore auction was announced by the RBI this week as part of the steps to tighten liquidity and stem the rupeeís slide.

The RBI had received bids worth Rs 24,279.2 crore, but it accepted bids worth only Rs 2,532 crore as it refused to raise the yields. It accepted 11 bids worth Rs 777 crore for the 2026 bonds and 10 bids worth Rs 1,755 crore for 2030 bonds. The results released by the RBI revealed that there was no bid for 8.07 per cent, 2017 bonds and 8.15 per cent, 2022 bonds.

The RBI is apparently not ready to accept the higher yields demanded by bond investors as the liquidity tightening measures are temporary.

The RBIís decision to set low cut-off rates for the sale was part of an attempt to avoid sending signals to the market about the appropriate level for bond yields. ďThere is some confusion about the yields and the RBIís intention. Investors are looking for higher yields which the RBI refuses to accept,Ē said an official.

NS Venkatesh, head of treasury, IDBI Bank said the RBIís acceptance of certain amount of bids and rejection of others is an indication that it is conducting OMOs only for liquidity management and doesnít want the yield level to be higher.

The rupee extended losses for the second day on Thursday, dropping 33 paise to 59.67 against dollar, after the US Federal Reserve comments strengthened the dollar. The losses in rupee in past two sessions has brought the rupee close to its levels seen before RBI had unveiled a skew of measures to tame the rupee volatility.

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