India’s bond market passed its first supply test after the Reserve Bank’s rate hike. The RBI sold Rs 23,000 crore of the 7.06 percent 2041 security and Rs 13,000 crore of the 7.43 percent 2076 security on Friday, drawing competitive bids of Rs 64,288 crore (2.79x cover) for the 15-year paper and Rs 27,815 crore (2.14x) for the 50-year paper. Cut-off yields came at 7.4898 percent for 2041 and 7.8015 percent for 2076, with weighted averages of 7.4886 and 7.7882 percent. Not a rupee devolved on primary dealers, who had fully underwritten the sale earlier in the day at commissions of 0.54 and 0.88 paise per 100 rupees.
The auction is the first since Wednesday’s 25bp hike took the repo rate to 5.50 percent with a calibrated-tightening stance, and it confirms the demand is there even at these yields. The 10-year G-Sec had hardened 5 to 6bp to about 7.25 percent after the hike, so the 2041 paper clearing near 7.49 percent and the ultra-long 2076 near 7.80 percent trace a steeply rising long end. The 50-year reopening matters on its own: pension funds and insurers absorbing duration at 7.8 percent keep the government’s long-dated borrowing working while the RBI stays in tightening mode, with a 25bp December move still expected. Competitive bidding was concentrated, with only 106 and 63 accepted bids across the two lines, and non-competitive retail participation minimal.