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On Monday, the Reserve Bank of India (RBI) announced the sale of three securities for a notified amount of Rs.23,000 crore. The RBI made this announcement after cancelling two consecutive auctions due to the government’s good cash position.
Securities for Auction
The auction announced by the RBI includes the sale of the new benchmark 6.54% GS 2032 worth Rs.13,000 crore, 6.95% GS 2061 bonds worth Rs.6,000 crore, and GOI FRB 2028 worth Rs.4,000 crore. The government will conduct the auction using a uniform price method for 6.54% GS 2032 and GOI FRB 2028 and a multiple price method for 6.95% GS 2061.
In the uniform price auction, the successful bidders would be allotted papers at the cut-off price level, above which the government will not accept any bid irrespective of the rate quoted by them. Under the multiple price method, the successful bidders have to pay the price they bid for the allotted quantity of securities.
Auction Date
The auction of the three bonds will be held on 25 February 2022. The bidders should submit the competitive and non-competitive bids for the auction in electronic form on the RBI Core Banking Solution, i.e. E-Kuber system, on 25 February 2022.
The bidders should submit the non-competitive bids on 25 February 2022 between 10.30 a.m. and 11.00 a.m. The bidders should submit the competitive bids between 10.30 a.m. and 11.30 a.m. The government will announce the result on the same day, and successful bidders will have to make payments on 28 February 2022.
The primary bidders should submit the bids for the underwriting of the Additional Competitive Underwriting (ACU) portion from 9.00 a.m. up to 9.30 a.m. on 25 February 2022 on the E-Kuber system.
Impact of Cancelling Earlier Auctions
Earlier, the RBI cancelled two weekly bond auctions due to the government’s good cash position after consultation with the Government of India. The auction cancellation turned out positive for bond yields, which sharply increased after announcing higher borrowing figures in the Budget.
The yields eased around 12-15 bps in the previous two weeks and are currently trading in a narrow range. The new 10-year benchmark 6.54% GS 2032 bond yield ended at 6.6925% on Monday.
For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in
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