The market viewed this as a move to correct the long-term yield curve, which became extremely flat with yield falling in the longer-dated maturities.
The auction will be held on July 1. The notified amount for auction programme has been increased to Rs 12,000 crore from Rs 9,000 crore as mentioned in the auction calendar. The RBI has also announced the dated stocks for which auctions will be conducted. These are the 7.37 per cent 2014 paper for Rs 5,000 crore, the 6.05 per cent 2019 for Rs 4,000 crore and the 6.13 per cent 2028 for Rs 3,000 crore.
The auction programme scheduled between July 14 and 21 will be held for Rs 9,000 crore, increased from the earlier notified amount of Rs 4,000 crore.
Meanwhile, RBI deputy governor Rakesh Mohan on Thursday morning dashed hopes of a repo rate cut. At the sidelines of a press conference on launching of multi-bank facility for depositting excise tax, Dr Mohan said that the domestic macro-economic scenario did not allow any scope for the repo rate cut. The inflation is now around 5 per cent and the outlook remains the same. This is as mentioned in the monetary and credit policy. So, nothing has changed, Dr Mohan viewed, adding that RBI has noted the Federal Reserves decision of reducing the rate by 25 basis points to one per cent.
Dr Mohans statement did not go down well with the bond market. Prices fell by around 30 paise in the day. The 9.81 per cent 2013 paper was last traded at Rs 130.55 at a yield of 5.731 per cent. On Wednesday, the yield was at 5.704 per cent. The RBI decision on interest rate will help the rupee to rise further as the differential between the US and the domestic interest rate has widened further. This will also increase the arbitrage opportunity, a banker said.