The devolvements have started again! Last week, we saw the bond auction devolve (just a little bit) as the RBI refused to sell at higher yields even though there was demand. Today about Rs. 2700 cr. devolved devolved, in some very liquid bonds – 2025 (the current 10 year!) included. Interesting to see that while the 10-year – the 2025 bond – trades in the market at 7.78% the bids seem to have been at higher than 7.81%, and that doesn’t make sense at all. The RBI is basically sending the message here that they will not accept high yields. The 2034 is scary – because the yield just went above 8%! It’s not even like supply is massive, and the market yields of the 2034 bond as we write this is 7.98%, so there’s a 3bps difference between the auction and the market. A devolvement means primary dealers have to take the volume and they usually dump it in the market.… (Read On…)
[via Capital Mind » Capital Mind]
Follow us @investmentheat – lists / @sectorheat