Government Securities Auction Sees Mixed Results as Primary Dealers Accept Full Underwriting Obligation

Government Securities Auction Sees Mixed Results as Primary Dealers Accept Full Underwriting Obligation​

The Reserve Bank of India (RBI) has released the comprehensive results of its recent Government Stock auction, detailing the allocation and performance across two significant instruments for investors. The auction saw varied levels of participation in competitive bidding for the designated government securities, with full underwriting commitment received from primary dealers.

Auction Performance Breakdown: GS 2040 vs GS 2076​

The auction focused on two tranches: the 6.68% GS 2040 and the 7.43% GS 2076. The Notified Amount for both securities was set at ₹17,000 crore and ₹11,000 crore, respectively. These amounts represent the total exposure targeted from market participants during the bidding process.

Competitive bids were received vigorously across both tranches. For the 6.68% GS 2040, 279 competitive bids were placed, totaling an amount of ₹62,938.000 crore. In contrast, the 7.43% GS 2076 witnessed 173 competitive bidders who committed to ₹29,635.000 crore.

Cut-off Prices and Competitive Allocation Details​

The auction concluded with specific cut-off prices and yields established for each security. The 6.68% GS 2040 was settled at a cut-off price of 96.71, corresponding to a Yield to Maturity (YTM) of 7.0530%.

For the 7.43% GS 2076, the accepted cut-off price was recorded at 98.64, reflecting a YTM of 7.5346%. The performance indicators suggest clear pricing mechanisms were applied during the auction phase.

Primary Dealer Acceptance and Allotment Status​

In terms of acceptance, only 4 competitive bids were accepted for the 6.68% GS 2040, amounting to ₹16,990.345 crore. For the 7.43% GS 2076, 21 competitive bidders successfully secured an allotment worth ₹10,983.189 crore.

The allocation data reveals a high degree of absorption in the first security. The Partial Allotment Percentage for the 6.68% GS 2040 reached 99.7560%, indicating near-full subscription from competitive bids. Conversely, the allotment percentage for the 7.43% GS 2076 was noted at 12.4095%.

Non-Competitive Bids and Weighted Average Pricing​

The auction also included non-competitive bidding streams. A total of 7 non-competitive bids were received for the 6.68% GS 2040, which totaled ₹9.655 crore in amount. Similarly, there were 5 non-competitive bidders for the 7.43% GS 2076, committing an amount of ₹16.811 crore.

The Weighted Average Price and Yield (WAY) figures reflect the overall market absorption. The 6.68% GS 2040 settled with a WAY at 96.72, corresponding to a 7.0518%. For the 7.43% GS 2076, the WAY was 98.69, with a Yield of 7.5307%.

Underwriting and Institutional Commitment​

Crucially, both tranches saw full commitment regarding underwriting obligations from primary dealers. The Notified Amount for both securities remained at ₹17,000 crore and ₹11,000 crore respectively. These figures were fully accepted by the primary dealers.

There was no devolution noted on the Primary Dealers (NIL) for either government stock instrument. This indicates complete confidence in the market mechanism and full acceptance of the underlying risk structure by institutional players.