Underwriters save another bond auction ahead of RBI policy

India’s central bank asked primary dealers to rescue yet another government debt auction in efforts to keep a lid on yields ahead of the monetary policy review on Friday.

Primary dealers bought about 126.8 billion rupees ($1.7 billion), or 40% of the 320 billion rupees of sovereign bonds on offer, the Reserve Bank of India said in a statement Thursday. Overall, investors bought 219.3 billion rupees of debt. Long-end bonds fell.

The central bank has asked underwriters multiple times this year to rescue debt auctions or canceled the sales, indicating dwindling demand for the government bonds. Traders may also be refraining from taking any risk ahead of the monetary policy decision Friday, where it’s likely to outline bond purchases for the July quarter.

The RBI can set the auction prices for “some time, but I’m not sure how long that can last. Clearly, there is a conflict between what RBI wants in terms of price and what the market wants,” said Pankaj Pathak, fund manager at Quantum Asset Management. One of the reasons why people are not bidding may also be due to the RBI policy on Friday, said Pathak.

Bloomberg

Underwriters bought 107.4 billion rupees of 2026 bond, almost all of the 110 billion rupees on offer, and purchased 19.4 billion rupees of 2050 bond, compared with the 70 billion-rupee target, according to the central bank.

The yield on the 6.67% 2050 bond rose two basis points to 6.97%, while that on the benchmark 10-year notes were little changed at 6%.