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15,000 cr. bond auction hits subscription wall at the long end

After weeks of full subscription to the 15,000 crore weekly bond issuances, last Friday’s bond sale was not fully subscribed. Around 900 cr. could not be sold, and devolved on the primary dealers. (That means, the primary dealers had to pay up because not enough valid bids were received below the cut-off yield)

The devolvement was only in the 18 and 26 year issue with a yield cut-off above 7.8% – the shorter term paper, 5 and 12 year bonds, were more than 2x oversubscribed. It may not be a very big deal, but it may give the government the feeler that large ticket bond sales can’t sustain subscription too long.

There are other sources of government funding: PSU disinvestment and 3G auctions are likely in the next few months. Bond sales might end up slowing down, even if only to ease supply temporarily. With the budget coming up though, all bets are off – this government can throw us a socialist googly like it has so often in the past.

  • Anonymous says:

    > No valid bids received

    Please recheck the press release you linked to. The amount bid was way in excess of the notified amount.

    How did you come to the judgement that valid bids in excess of the amount alloted were not received?

  • Deepak Shenoy says:

    >Ah, it should have been "not enough valid bids below the cut off yield" – fixed that. Thanks for the heads up!

    There were enough bids but not enough that were below the cut-off yield – most likely because participants expected a higher yield I imagine, or would like to have pushed it higher at least.

    (When I say "valid" I only mean below the cut-off yield. I realize this could be misunderstood, so I've qualified)