Yields on 10-year SDLs up a tad from previous auctions

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Mumbai | Published: May 11, 2016 6:11:24 AM

Yields on state development loans (SDL) saw a marginal increase from levels witnessed during previous auctions, Reserve Bank of India (RBI) data showed on Tuesday.

Palvai Govardhan Reddy, RBI, RBI newsYields on state development loans (SDL) saw a marginal increase from levels witnessed during previous auctions, Reserve Bank of India (RBI) data showed on Tuesday. (PTI)

Yields on state development loans (SDL) saw a marginal increase from levels witnessed during previous auctions, Reserve Bank of India (RBI) data showed on Tuesday.

Gujarat and Kerala saw a cut-off yield of 7.98% for their 10-year paper. It is two basis points higher than the levels seen during April 26 auction.

Punjab, Tamil Nadu, Telangana witnessed yields of 8%, 8.01% and 8.02% on their 10-year papers. These states had seen yield of 7.96% during the previous auction. Uttar Pradesh saw yield of 8.03% on its 10-year paper.

Yields on SDLs started falling in April post the repo rate cut of 25 basis points by the central bank. In an auction conducted in March, SDL yields for 10-year paper stood in the range of 8.08%-8.10%.

These levels in late March were the beginning of a fall in yields even as a fall in the consumer price index (CPI) inflation had triggered rate cut expectations in the market. In early part of March, the levels stood at elevated levels – in the range of 8.51%-8.60% – for 10-year SDL.

However, these securities are yet to attract any considerable interest from the foreign portfolio investors (FPIs) segment. Of the allotted quota of Rs10,500 crore, FPIs have utilised just Rs3,880 crore, which is 36.95% of the total limit, according to the latest depository data.

The central bank had allowed FPI investment in SDL in the September 29 monetary policy when it stated that the limit will be increased to reach 2% of the outstanding stock by March 2018. “This would amount to an additional limit of about ? 500 billion by March 2018,” it had said.

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