Govt bonds crash to 4-month lows as 1st bond auction fails

The maiden government auction of Rs 18,000 crore was a disappointment, in that about Rs 1,200 crore of the bonds remained unsold and had to devolve on the underwriters.

However, the important 9.15% 2024 bond got fully subscribed although at a tall yield of 8.84%. The government had auctioned Rs 8,000 crores of this bond, the highest ever of a single bond in one shot.

More important was the crashing impact the entire auction had on bond prices. The benchmark 10 year bond ended the day at 8.73% up 16 basis points from its previous close. This is the highest the yield has touched since November 30th 2011. Many dealers expect the 10 year may touch even 9% later in the month.

Earlier in March the government announced a front-loaded borrowing calendar which aims at mopping up Rs 3.7 lakh crore, or 65% of the year