The Reserve Bank of India found takers for only less than half of three-year bonds worth ₹3,000 crore it auctioned on Thursday, as investors expected higher yield amid tight liquidity in the market.
As many as 65 bidders sought to buy the paper, which will mature in 2021, but the central bank accepted just five bids for ₹1,380 crore with a weighted average yield of 6.72%. The underwriters to the issue, known as primary dealers, need to take the unsold portion of ₹1,620 crore in their books.
“The devolvement is a reflective of a tight liquidity situation while the bond market too is showing signs of fatigue,” said Sandeep Bagla, associate director at Trust Capital.
Market participants are seeking higher spread over the RBI’s policy rate — which is currently 6% — because of the shortage of cash, he said. “The RBI is clearly not comfortable with it as the proposed dollar swap auction is expected to infuse more rupee liquidity, easing the cash crunch in the market.”
The sale took place Thursday as Friday — which is usually the day when auctions are held — is a public holiday this week.
The banking system has been running short of cash with the deficit hovering in the range of ₹71,000-51,000 crore in April. Election spending is primarily blamed for this.
The RBI has introduced a new method to infuse rupee liquidity, called dollar swap auction, which should collectively pump in $10 billion equivalent of rupees into the system by next week.
The RBI, the investment banker for the government, sold five series of sovereign bonds on Friday, raising ₹17,000 crore collectively.