Budget 2018: An auction for purchase of limits to buy gilts worth Rs 4,569 crore on Monday attracted bids worth Rs 8,306 crore ($1.31 billion) from foreign portfolio investors (FPIs). At the previous auction, FPIs had bid for limits worth Rs 11,988 crore against a total notified amount of Rs 6,666 crore. A total of 89 bidders put in their bids during Monday’s auction compared with 78 in the previous auction held on January 08. The highest bid in Monday’s auction was of 8 basis points, whereas in the previous auction it was 5.1 basis points. The cut-off at Monday’s auction was 5.01 basis points versus 3.33 basis points in the previous auction. Auctions for bond limits – whether to buy gilts or corporate bonds – are conducted when these investment limits get freed up either due to redemption or sales in the market or on additional quota being introduced by the government.
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Bond dealers say foreign investors are accumulating limits as yields are extremely attractive. “FPIs want to acquire the limits ahead of the budget as they do not want to miss any rally that may follow. The current levels are way too attractive to let go of a possible opportunity. They will definitely wait and watch for the budget before utilising their limits,” a dealer indicated.
On Monday, the 10-year benchmark yield rose 13 basis points to close at a 19-and-a-half month high level of 7.44%. The yield on the old benchmark bonds closed 15 basis points higher at 7.63%. So far in 2018, FPIs have infused $1.12 billion dollars into Indian debt—both corporate bonds and G-secs.