India’s Central Bank Rejects All Bids in Another Yield Signal
India’s central bank rejected all bids at a keenly watched bond-purchase auction.
(Bloomberg) -- India’s central bank rejected all bids at a keenly watched bond-purchase auction Thursday, which is being seen as another sign that authorities want to keep yields in a tight range.
This is the first time this year the Reserve Bank of India has turned down the entire lot of paper at a so-called open-market operation. It was scheduled to buy 100 billion rupees ($1.35 billion) of debt maturing between 2026 and 2031, and received bids worth 664.7 billion rupees. It didn’t offer a reason for the decision.
“The RBI may not have been happy with the yield levels the market offered,” said Naveen Ramnani, a fixed-income trader at UCO Bank in Mumbai. The RBI is clearly signaling it wants yields below 6%, he said.
The yield on benchmark 10-year bond rose to 6.03% after the results were announced before easing to 6%.
The open-market purchase was announced amid demand from traders that the RBI should start bond buys to support the unprecedented debt supply of $163 billion this year, which many expect may be further expanded to aid an economy set for the worst contraction in four decades.
The move to not buy any bonds follows the RBI’s decisions since mid-August to reject bids at three bond sales. That’s triggered speculation the RBI may now announce more steps to ensure yields stay steady. To support the bond market, the RBI announced Operation Twists -- simultaneous purchase and sale auctions -- worth 100 billion rupees on Oct. 1
“The size offered in the OMO as well as RBI’s assumed reluctance to accept offers that may have been significantly below secondary market prices suggest further measures may be forthcoming,” said Suyash Choudhary, head of fixed income at IDFC Asset Management in Mumbai. “An OMO calendar that assures market participants of future takeouts seems the most logical option.”
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