Auction Preview

The RBI will today sell a total INR 260bn of debt at auction, results due after 1030BST/1500IST.

• INR 30bn 3.96% 2022 bonds (previous auction March 5, sold INR 30bn, yield 4.3775%, cover 3.97)
• INR 140bn 5.85% 2030 bonds (previous auction March 5, sold INR 120bn, yield 6.2197%, cover 2.14)
• INR 90bn 6.67% 2061 bonds (previous auction March 19, did not sell any bonds, average yield of bids received was 6.8202%)
• The auctions could be hard to digest, the RBI conducted its fist GSAP purchases yesterday but bond yields rose after the operation. The disappointing results cast doubts on the efficacy of the programme as a time when a dramatic uptick in coronavirus cases threatens to shutdown large parts of the economy. Participants were hoping the bank would focus purchases on the 10-year sector, but out of the INR 250bn of purchases only INR 75bn of the 10-year was taken up. Another factor disappointing markets was the high cut off yield, markets hoped it would be possible to purchase from the secondary market and sell in GSAP for a profit, but this didn't transpire.
• If the results of the auction are poor and primary dealers are saddled with large allocations again then subsequent offloading in the secondary market will exacerbate yield woes for the RBI.
• The RBI did announce details of an INR 200bn conversion offer on April 19 yesterday, switching short term for longer term paper. Full details here: