MUMBAI - India's benchmark 10-year bond rallied on Friday, sending its yield down as much as 13 basis points on day after the Reserve Bank of India accepted bids for less than a third of the amount of bonds being sold at the auction.
The RBI did not accept any bids for the 6.84 percent 2022 bond nor the 6.68 percent 2031 bond being auctioned on Friday, after initially seeking to sell up to a combined 110 billion rupees ($1.72 billion) in both.
The central bank, however sold 40 billion rupees in bonds at the auction, split equally among the 6.57 percent 2033 bond and the 7.06 percent 2046 bond. (http://bit.ly/2pUCyu7)
The unexpected decision not to accept any bids for two of the issuances reduced some of the liquidity concerns that had sent bond prices sharply lower this week after the government said it would sell an additional 500 billion rupees in January-March.
Traders said the rejecting of bids at the auction was not being seen as a rate signal but was more of a temporary relief for the market after the recent sell-off.