Supply Due Tomorrow

India will sell a total INR 240bn across four auctions on Feb 26, the auctions will comprise of:

INR 40bn 4.48% 2023

INR 40bn 2033 floating rate bonds 2033

INR 110bn 6.22% 2035 bonds

INR 50bn 6.67% 2050 debt

• The RBI will retain the option to retain additional subscription of as much as INR 20bn against each of the securities
• The RBI have tweaked the auction method for the sales, unhappy with the results of recent auctions post the Feb 1 budget announcement. The auction will be conducted using uniform-price method for 6.22% 2035, and multiple-price method for 4.48% 2023, FRB 2033 and 6.67% 2050 bonds. The move is aimed at preventing a spiral in debt costs. The changes mean bond dealers can now bid without concerns of losing out as the RBI will establish the final yield and allotment.
• There have been calls for the RBI to disincentivize shorting bonds, Soumya Kanti Ghosh of State Bank of India wrote in a client note that the RBI should increase both implicit and explicit costs of shorting through asking sellers to cover the sale in 30 days instead of the current 90 days and by introducing negative interest rates.