The Reserve Bank of India devolved the new benchmark paper in the second weekly sale as investors demanded higher yield. Primary dealers or bond houses took Rs 11,144 crore worth of such securities on their books as those could not be sold through the auction process.
The central bank accepted about Rs 2,856 crore only out of Rs 14,000 crore that was on the offer as part of the weekly sales.
“We can see that the 10-year yield has been crawling up over the weeks and while the RBI did manage the yield curve and keep the rate at around 6 per cent, the market has been demanding a higher return,” said Madan Sabnavis, chief economist at CARE Ratings.
The cut-off yield, above which none could bid, came at 6.15 percent, which is on par with the secondary market level.
The gauge Friday yielded 6.16 percent in the secondary market; three basis points higher than the level reported a day earlier.
There will be one more auction next week before the MPC (Monetary Policy Committee) meets and the market is awaiting the tone of the discourse, said Sabnavis.
Mint Road, the government’s merchant banker aimed to sell Rs 26,000 crore worth of sovereign papers in the primary market Friday. There were three sets of papers including the new benchmark series, which was first introduced in the weekly auction on July 9.
The new benchmark offers a coupon of 6.10 percent, 25 basis points higher than the outgoing paper that has an outstanding of Rs 1.19 lakh crore.