RBI cancels bids for Rs 11,000 cr bonds

RBI cancels bids for Rs 11,000 cr bonds

The Reserve Bank of India (RBI) on Friday refused to accept bids for Rs 11,000 crore worth of bonds in the final auction of this calendar year.In all, four bonds for Rs 15,000 crore were on offer.Bids for two bonds —one maturing in 2022 (Rs 3,000 crore on offer) and another in 2031 (Rs 8,000 crore)—were rejected by the central bank.

It sold the remaining two bonds worth Rs 2,000 crore each and maturing in 2033 and 2046.The signal from the RBI has been that high yields would not be acceptable to the central bank or the government.Also, and that the yield movement have been over the top inashort span.

The decision not to accept bids for two bonds addressed some of the market concerns related to liquidity after the government announcement on Thursday that it was going for additional borrowing of Rs 50,000 crore."The partial cancellation of the auction means that the government has a comfortable cash position and is unwilling to pay high coupons," said Piyush Wadhwa, head of trading at IDFC Ban

Following the auction results, bond yields fell 15 basis points to 7.25 per cent in the intraday, before climbing back to close at 7.33 per cent, from its previous close at 7.40 per cent.This is a marginal relief for banks as they will now have to provide lower nominal losses on their bond portfolio.

Nevertheless, considering the 10year bond yield was at 6.648 per cent at the start of the quarter, the yield movement is still at 68 basis points in the quarter.The bank treasury, therefore, will have to takeahit on their books.

According to bond dealers, nationalised banks were buyers in the market, whereas foreign banks were on a selling spree following government´s extra borrowing announcement.Nationalised banks were particularly buying some illiquid stocks so that yields fall and markto market losses are minimised, said bond dealers.

However, such yield management is not possible in the benchmark segments as liquidity in those stocks is significant.Banks are also limited by the liquidity in hand.Data shows liquidity has shrunken considerably in recent period.For example, banks borrowed to the tune of Rs 36,604 crore as of Thursday, according to RBI data.Friday´s figure will come on Monday, but it is likely that banks may have turned net borrower.

This is contrary to what banks have been doing in the recent months as they were sitting on high liquidity following demonetisation.The government, meanwhile, had a cash balance of about Rs 4,500 crore as on December 23, RBI data showed

Unless the government starts spending this money, yields would continue to be under pressure, dealers said. “Liquidity is tight in the system and therefore banks have demanded higher yields.But no government would want to borrow at this price,” said Srinivasa Raghavan, CFO of KBS Local Area Bank.

RBI´s yield signal is important, but may not be enough in the long term as banks are satiated with their bond holdings.But supply of papers would continue this year and may even rise next financial year. Dealers say the auction has not been cancelled, but ´postponed´ and the government is likely to return with another auction date for the Rs 11,000 crore portion

"Investors don´t have strong expectations of yields going up or down, but the risk appetite is severely hit as banks are sitting on about nine per cent of excess SLR and they have suffered huge MTM losses in those," said Wadhwa

BID DETAILS

Four bonds forRs 15,000 crore were on offer

Bids for two bonds —one maturing in 2022 (Rs 3,000 crore on offer) and another in 2031 (Rs 8,000 crore)—were rejected by the central bank

It sold the remaining two bonds worth Rs 2,000 crore each and maturing in 2033 and 2046

Following the auction results, bond yields fell 15 bps to 7.25 per cent in the intraday

The Business Standard, New Delhi, 30th December 2017

Household debt up, but India still lags emerging-market economies: RBI

Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...

External spillovers likely to hit India's financial system: RBI report

While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...

Unknown11 January 2019 at 15:38
I recently ran over your blog and have been reading along. I figured I would leave my first comment. I might want to thank you for the efforts you have made in writing this article. Basically I'm a writer I would like to share my website here Dissertation writing service and sometimes I wait for your post to get more this type of blogs. A good blog always comes-up with new and exciting information and while reading I have feel that this blog is really have all those quality that qualify a blog to be a good one. What a great post, Great blog you have Thanks for sharing.

CA Online

Search This Blog