The 50-year government security debuted on Friday — with the demand for the paper at four times the notified amount and the Reserve Bank of India (RBI) fixing a cut-off yield of 7.46 per cent.

The bond was expected to see strong demand from insurance and pension firms.

Against the notified amount of Rs 10,000 crore, the GS 2073 saw competitive bids of Rs 40,200 crore, while the non-competitive bids stood at Rs 11.91 crore.

Of this, the RBI accepted competitive bids of Rs 9988.069 crore and non-competitive bids of Rs 11.931 crore.

The cut-off yield of 7.46 per cent was lower than the yield for the 40-year paper of 7.5373 per cent that was auctioned last week.

The markets had expected a cut-off yield of 7.55 per cent for the 50-year paper.

Analysts now expect a resilient demand for the other two tranches of the 50-year paper — of Rs 10,000 crore each — to be held on December 11-15 and January 22-26.

The government plans to mobilise Rs 6.55 lakh crore in the second half of the fiscal, with the target for the fiscal at Rs 15.43 lakh crore

More than one-third of the bond supply in the second half of this fiscal year is reportedly via G-Secs maturing in 30-50 years. This is helpful to the government
as it stretches the duration of the payment period for the bonds.

Meanwhile, yield on the benchmark 10-year security was stable at 7.32 per cent even as US treasury yields continued their slide.

However, the decline in US yields has not impacted the rates in India, given the debt supply during the second half and the Reserve Bank of India’s (RBI) decision to further soak up liquidity through the open market sale of bonds.

Lenders slam RBI

Indian lenders have told the central bank that its plan to sell government bonds and its intervention in the foreign exchange market has hurt trading volumes, four bankers said on Friday.

Officials of the RBI met select lenders on Thursday, where these issues, among others, were discussed, according to bankers aware of the development.

“Since the RBI has announced its intention to conduct open market bond sales, trading volumes have gone down sharply and yields are stuck in a very narrow range,” one of the bankers said.

“There is hardly any interest to go for big positions on either side.”

The central bank on October 6 said that it plans to sell bonds via auctions to manage banking system liquidity.

The unexpected announcement pushed bond yields higher.

Since October 9, the 10-year benchmark yield has been stuck in a narrow 11-basis-point range, due to uncertainty about the timing and tenor of the bond sales, which has hurt volumes. With inputs from Reuters