The Reserve Bank of India accepted 11,302.18 crore rupees of source securities in Monday’s conversion auction, against 20,000 crore notified across six lines, and issued 11,651.116 crore of destination securities in exchange. The operation swaps near-dated government bonds for longer ones, extending the maturity profile of the debt without new cash borrowing.
Take-up was uneven. The 8.26 percent 2027 source line was filled in full at 2,000 crore, switched into the 7.19 percent 2060 at a cut-off yield of 7.8391 percent, and the 7.17 percent 2028 line filled its 3,000 crore into the 7.41 percent 2036 at 7.3867 percent. The 7.06 percent 2028 line was cut back to 1,925 crore of 3,000 crore notified, and the 6.79 percent 2029 line to 2,000 crore of 4,000 crore. The 6.03 percent 2029 line drew no offers at all against 4,000 crore notified.
Destination cut-off yields clustered between 7.3590 percent on the 2033 and 7.4311 percent on the 2039, with the 2060 the outlier at 7.8391 percent. Holders’ reluctance to extend at these levels, three weeks after the central bank raised the repo rate to 5.50 percent on October 7, is the constraint on debt management this quarter: the switch programme works only when investors are willing to be paid term premium they currently judge too thin.