Foreign institutional investors (FII) were ready to pay the highest price, 35 basis points, to get hold of investment limits in government bonds at the auction. The cut-off came in at 30 bps, the highest ever. Limits worth R646 crore (around $100 million) were put up for auction on Tuesday, attracting bids worth R2,094 crore (around $350 million).
FIIs have already exhausted 99% of the $25-billion investment limit in government bonds. The Securities and Exchange Board of India (Sebi) had mandated that once 90% of investment limits are used, the rest would be auctioned.
Even in the previous auction on October 1, FIIs had bid aggressively. However, the cut-off price at that auction had been 15 bps, far lower than the 30 bps at Tuesdays auction. FIIs have poured in a record $21.6 billion into Indian bonds so far in 2014, the highest ever inflow seen since liberalisation.
Yields on government bonds range in 8.25-9.50% band across tenures with the 10-year benchmark security at 8.37%.