Tag: papers

The government securities (G-Sec) market on Thursday saw a mild rally despite the Reserve Bank of India (RBI) devolving two G-Secs on primary dealers (PDs) at the auction.

The RBI devolved about 98 per cent and 28 per cent of the notified amount at the auction of 2026 GS (Coupon: 5.63 per cent) and 2050 GS (6.67 per cent), respectively, on PDs.

Marzban Irani, Chief Investment Officer – Fixed Income, LIC Mutual Fund, said the mild rally in the secondary market was surprising, considering that RBI devolved two G-Secs on PDs.

He opined that the central bank would have supported the secondary market through G-Sec purchases.

The 5.63 per cent GS 2026 rallied 11 paise to close at ₹100.30 (previous closing price: ₹100.19), with its yield thawing about 3 basis points to 5.55 per cent (5.58 per cent). Bond price and yields are inversely related and move in opposite directions.

Devolvement

As against the notified amount of ₹11,000 crore at the auction of the 2026 G-Sec, the RBI devolved ₹10,735.76 on PDs.

As against the notified amount of ₹7,000 crore at the auction of the 2050 G-Sec, the RBI devolved ₹1,944.791 on PDs.

The other two papers —Floating Rate Bond (2033/ notified amount: ₹4,000 crore) and 2035 GS (6.64 per cent/notified amount: ₹10,000 crore) — sailed through at the auction, with greenshoe amount of ₹2,610.213 crores being accepted in the case of the 2035 GS.

Irani said RBI may announce a bigger Government Securities Acquisition Plan (G-SAP) for the second quarter to support the yields as the Government may need to borrow more to compensate States’ revenue loss arising from shortfall in tax collection due to the pandemic.