Tag: G-Sec auction

Govt may cancel FY21’s last weekly G-Sec auction

Banking & Finance

[ad_1]

Read More/Less


The government may cancel the last weekly securities auction of FY2021 on rising expectations that the overall direct tax collection will exceed the revised target.

This, in turn, could soften Government Security (G-Sec) yields in the run up to the close of the fourth quarter and the financial year.

Market players expect the last weekly G-Sec auction for ₹20,000 crore to be cancelled as advance tax collections have turned positive at the end of the fourth instalment and the government has cash balances with the Reserve Bank of India.

Marzban Irani, CIO-Fixed Income, LIC Mutual Fund, observed that there were reports that the government will weigh whether it needs money from the last weekly auction of FY2021.

“The government is having balances with the RBI. They could have ideally cancelled tomorrow’s auction (aggregating ₹29,000 crore) and next Friday’s auction (aggregating ₹20,000 crore). Given that we are close to the year end, cancellation of the last auction could help vis-a-vis valuation of banks’ treasury portfolio,” Irani said.

Yield inches up

The yield on the 10-year benchmark G-Sec (coupon rate: 5.85 per cent) inched up 2 basis points on Thursday to close at 6.2023, with its price declining about 12 paise to ₹97.45 over the previous close.

The yields in the secondary G-Sec market moved up on Thursday in sync with the US Treasury yields.

The yield differential between the 10-year benchmark G-Sec and the 15-year G-Sec (coupon rate: 6.22 per cent) is now about 63 basis points.

This differential shows that the RBI is intervening in the market, especially through special open market operations (OMOs), to keep the 10-year benchmark yield from rising, bond market dealers said.

The yield on the 10-year benchmark G-Sec has jumped about 30 basis points, with its price dropping about ₹2 since January-end.

Meanwhile, the RBI has announced that it will conduct special OMO, entailing simultaneous purchase and sale of G-Secs aggregating ₹10,000 crore each on March 25.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , ,

G-Sec auction falters yet again

Banking & Finance

[ad_1]

Read More/Less


Government Security (G-Sec) yields rose on Friday as the Reserve Bank of India devolved a significant portion of the auction of three G-Secs on Primary Dealers, indicating its discomfort with the yields at which the market participants wanted to buy these securities.

Auctions held since February have seen significant devolvement as investors are demanding higher interest rates on government securities.

On Friday, the central bank said it devolved on PDs about 72 per cent of the cumulative ₹27,000 crore the government wanted to raise via auction of three G-Secs.

The auction of the floating rate bond, maturing in 2033, however, sailed through, with the RBI accepting the greenshoe amount of ₹2,000 crore over and above the notified amount of ₹4,000 crore.

PDs are a key link between the RBI, which is the debt manager to the government, and investors (banks, insurance companies, mutual funds, etc), providing liquidity and market making services in the secondary market. For underwriting the auctions, PDs earn a commission.

In the secondary market, the yield on the benchmark 10-year G-Sec (carrying 5.85 per cent coupon) and the five-year G-Sec (5.15 per cent) rose about 2 basis points (to 6.2324 per cent) and 6 bps (to 5.8506 per cent), respectively. These G-Secs were among the four that were auctioned today.

Price of G-Secs declined

The price of the aforementioned G-Secs declined about 14 paise (to ₹97.23) and about 24 paise (to ₹97.165), respectively.

In the five weekly G-Sec auctions conducted so far since the announcement of the Union Budget on February 1, the central bank has devolved one to three G-Secs on PDs in each of these auctions.

Marzban Irani, CIO, LIC Mutual Fund, observed that in the backdrop of oversupply of G-Secs, rising oil prices and US Treasury yields, the RBI needs to come up with a calendar to conduct special open market operation (OMO), entailing purchase of G-Secs of long-term residual maturity and sale of G-Secs with short-term residual maturity, for the rest of March 2021 to address the anxiety among market players about the adverse movement in yields.

Since January-end 2021, yield on the 10-year benchmark G-Sec has jumped about 33 basis points, with its price declining about ₹2.35. Yield and price of bonds are inversely related and move in opposite directions.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , ,