RBI devolves bond sale for fourth time

The Reserve Bank of India (RBI) declined to accept bids at a government bond auction for the fourth time in seven weeks as it fights to cool benchmark yields which have crossed 6%.

Primary dealers who underwrite government bond auctions purchased 17,860 crore of the 18,000 crore 10-year paper on offer, an RBI statement said. The cutoff yield was set at 6.0095% compared with 6.03% estimated in a Bloomberg survey. The central bank does not offer reasons for its decision.

Sovereign bonds fell after the auction result, with the 10-year yield rising 5 basis points to 6.04%.

Friday’s was the last bond sale for the first half of the current financial year, and the government is expected to announce its borrowing plan for the second half some time next week. The Centre is expected to breach its 12 trillion borrowing target, as the Indian economy enters a phase of deeper recession.

On Thursday, RBI had turned down bid offers for an outright purchase of government securities under open market operations while it announced another edition of Operation Twist worth 10,000 crore. Though it received bids more than six times on offer, the central bank accepted none of the bids as it was not comfortable buying these bonds at higher yield. RBI had offered to purchase long-term securities maturing between 2026 and 2031.

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