After the cancellation of the 364 day T-Bill auction on Wednesday , we have further drama in bond markets. The 20 and 30 year bonds, auctioned today for 3,000 cr. each, have failed to get enough bids (or, the RBI didn’t want the government to pay that kind of interest). They have thus devolved on the underwriters, who will have to buy these bonds and find other people to sell them to. Around Rs. 2,600 cr. of bond have devolved. Which makes it the first “devolving” auction in FY 2016. We sensed something like this yesterday, when underwriting commissions went up to 4 basis points (0.04%). Typically they are less than 0.01%, but this time, the commissions were higher – only of these two bonds. Wow. 4.5 bps commission on 20-30 year bonds for the underwriting in the auctions tomorrow. Gonna be fun. — Deepak Shenoy (@deepakshenoy) May 14, 2015 Even at 4.5bps, these are nothing compared to the 86 bps commissions we saw in 2013 , when bond auctions devolved like crazy .… (Read On…)
[via Capital Mind]
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