Mumbia, Jan 25: The sale of 11.30 per cent 10-year state bond maturing in2010 floated by four states -- Arunachal Pradesh, Assam, Bihar and UttarPradesh -- held on Monday received oversubscription to the tune of Rs 507crore.The central bank received bids worth Rs 1,143 crore for a notified amount ofRs 636 crore. "Excess subscription will be refunded to the applicants," saida RBI release issued on Tuesday. The yield pegged for the 10-year bond is 46basis points higher than the government paper in the secondary market havinga similar maturity profile. The 11.99 per cent 2009 paper was quoted at10.83 per cent in the secondary market on Monday.
Through the auction, Arunachal Pradesh mopped up Rs 2.22 crore, Assam Rs86.45 crore, Bihar Rs 146.86 crore and Uttar Pradesh Rs 146.86 crore.According to an RBI release, the loan will be redeemable at par on January24, 2010.
According to money market experts, during the fortnight liquidity isexpected to be easy as over Rs 6000 crore is expected to come into thesystem through interest payment and redemption on a few securities. OnTuesday, the government securities prices weakened by 10-20 paise amidprofit taking by most players.
"Talk of a fresh bond auction to sterilise Rs 3,000 crore expected to flowinto the system on February 3 led owing to redemption of securities createdselling pressure in the market," said a dealer from a primary dealershipoutfit. Towards the day's close, 11.83 per cent 2014 was traded at Rs 104.36(Rs 104.49); 11.99 per cent 2009 at Rs 106.43 (Rs 106.48) and 12 per cent2008 at Rs 106.78 (Rs 106.80). Last weak, Karnataka loan auction maturing in2010 offering a coupon of 11.08 per cent mopped up Rs 200 crore. Theoversubscription was to the tune of Rs 9,000 crore.
Through the second tranche of state loan for 23 states held on September 9,1999, RBI had received oversubscription to the tune of Rs 980 crore. Thecentral bank had received bids for Rs 4,230.70 crore for an aggregate amountof Rs 3,250.08 crore.
In August 1999, the government of Andhra Pradesh and Tamil Nadu had raisedloans by auction in 10-year paper maturing in 2010 at a coupon of 11.29 percent.
The first tranche of state loan held in April last year maturing in 2009 ata coupon of 12.25 per cent was also oversubscribed.
In the first tranche, the central bank had received over Rs 5500 crore asagainst the notified amount worth Rs 3,440 crore.
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