Auction Preview

The RBI are to sell a total INR 320bn government securities today, results due after 1030BST/1500IST.

• INR 110bn 5.63% 2026 (prev. sale April 9, yield 5.63%, cover 2.25)
• INR 40bn FRB 2033 (prev. sale April 9, yield 4.84%, cover 3.08)
• INR 100bn 6.64% 2035 (prev. sale April 9, yield 6.116%, cover 2.69
• INR 70bn 6.67% 2050 (prev. sale April 9, yield 6.7316%, cover 2.21)
• The auctions last week were poorly received. The RBI cancelled the 10-year auction on Friday, rejecting all bids for the paper and effectively drawing a line in the sand for yields. The week previously the 5-year sale (the 5.63% 2026 issue) was rescued by underwriters, the seventh such occurrence this year. Underwriters took INR 109bn of the INR 110bn on offer.
• The coronavirus situation continues to worsen, India reported a global record number of cases yesterday. Mumbai and New Delhi have announced lockdowns, but PM Modi issued a plea to states to use lockdowns only as a last resort. The only potential saving grace from RBI Governor Das is that an economic slowdown could serve to cool inflation with prices near the top of the RBI's 2%-6% band. India is in a somewhat unique position in that while several countries are fighting to subdue yields, most other countries have below target inflation, rather than a risk of an overshoot.