Bonds remain unsold at RBI auction for third time in 4 weeks

Bonds remain unsold at RBI auction for third time in 4 weeks

A central bank auction of sovereign bonds didn’t find buyers for a chunk of the debt on offer at reasonable rates for the third time in four weeks, indicating that Mint Road will seek to lower yields that have remained uncomfortably firm despite policy rate reductions and spot measures.

Bond houses took about Rs 17,970 crore worth of unsold papers on their books as Mint Road did not oblige elevated yields that traders sought in the primary bond sale Friday. The central bank accepted just one competitive bid of Rs 25 crore at 6.02 percent.

“Clearly, the RBI is not comfortable with yields above 6 percent,” said Siddharth Shah, Head–Treasury, Senior Vice President, STCI Primary Dealer. “The market is ignoring the central bank’s signals. The authorities will have to come out with a plan to revive the waning investor appetite and check rising funding costs.”

New Delhi’s gross market borrowing has jumped to Rs 12 lakh crore this financial year from Rs 7.80 lakh crore estimated earlier.

Cash-strapped states are going deeper into debt to provide for the rising economic cost of the coronavirus.

This financial year, state governments and two union territories have cumulatively raised Rs 2.97 lakh crore via market borrowings, which is 51% more than the amount they had raised in the corresponding period last financial year, show data from CARE Ratings.