E-Paper
RBI accepts 6.10% yield on 10-year bond
RBI sold ₹14,000 crore of the new 2031 bond as part of the ₹26,000 crore planned weekly government security auction.
The Reserve Bank of India on Friday announced the cut-off yield for the new 10-year bond at 6.10% per annum, higher than that of the current benchmark, signalling a slight tolerance for a higher yield after months of trying to keep it at 6% or less.
RBI sold ₹14,000 crore of the new 2031 bond as part of the ₹26,000 crore planned weekly government security auction.
The central bank also sold ₹3,000 crore of 2023 bonds at 4.3% and ₹9,000 crore of 2061 bonds at 7.18%.
The previous 10-year benchmark paper has been trading in the secondary market at around 6.18%. Since 28 May, the 10-year paper has either seen a devolvement of large bids or cancellation of the instrument.
This was the first auction after May 21 when there was no devolvement of bids to primary dealers or a greenshoe option exercised for any instrument, Care Ratings said in a note.
While the transition to a new benchmark is a standard procedure every year, it assumes significance as the market was not willing to accept a lower yield for the 5.85% paper with trading volumes also coming down, said Madan Sabnavis, chief economist at Care Ratings.
For a considerable period, RBI has been locked in a tussle with bond market investors to keep yields below 6% and, consequently, keep the government’s borrowing costs low, despite rising inflation and supply concerns.
“This new paper at 6.1% is a signal to the market. It would need to be seen from Monday whether this yield remains stable or moves up, given that the inflation threat is high. The Consumer Price Index (CPI) number to be announced on Monday will also provide some direction subsequently,” he said.
