India Gilt auction spurs bonds
Published March 12th, 2007
The 10-year bonds rose the most since January 31 after demand at a government debt auction last week increased as overnight loan rates stayed near the lowest in more than a year.
Investors submitted bids for almost three times the amount on offer at the sale of 10-year bonds on March 9, compared with less than twice at a previous auction of seven-year bonds a month earlier, according to data provided by the central bank.
The debt securities also climbed after the central bank said sales this week to drain surplus cash will be a third of last week’s.
“The demand at the auction was better than expected, and the prices at which they were bid were also better,’’ said Sanjeet Singh, a bond trader at ICICI Securities, a primary dealer that underwrites government debt sales in Mumbai. “The liquidity available now is positive’’ for bonds.
The yield on the benchmark 8.07 per cent bond due 2017 fell 8 basis points, or 0.08 percentage, to 7.94 per cent at the 5:30 pm close of trading in Mumbai, according to data compiled by Bloomberg. The price of the security rose 0.54, or 54 paise, to Rs 100.84.
The government sold the 10-year bond at a cut-off price of Rs 100.05 apiece. Ten traders surveyed last week before the auction expected the bonds to be sold at a median of Rs 99.93. The central bank will sell Rs 2,000 crore ($452 million) of bonds on March 14 to remove excess funds, compared with Rs 6,000 crore last week.
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