The Reserve Bank of India sold the full notified amount at Friday’s government securities auction on November 6. The 7.06 percent Government Stock 2041 was sold in full at 23,000 crore rupees, clearing at a cut-off price of 97.07 rupees, an implicit yield of 7.3881 percent. The 7.43 percent Government Stock 2076, a fifty year maturity, was also sold in full at 13,000 crore rupees, clearing at 95.70 rupees for a cut-off yield of 7.7708 percent.
Neither tranche devolved on primary dealers. Devolvement, the mechanism by which unsold paper is forced onto the underwriting dealers, was nil for both stocks, which means competitive demand covered the entire 36,000 crore rupee sale at the cut-off prices.
The underwriting auction held the same day completed the picture. Primary dealers underwrote the full amounts of both securities, with additional competitive underwriting commission cut-offs set at 0.74 paise per 100 rupees for the 2041 stock and 1.14 paise per 100 rupees for the 2076 stock, the higher commission reflecting the longer duration risk of the fifty year line.
The result matters beyond the calendar. Indian government yields rallying this week on sliding oil prices, as noted in market reporting, met a heavy long-end supply test on Friday and passed it without the RBI needing to support the sale, which keeps the government’s borrowing programme on schedule into the second half of the fiscal year.