Business Standard

Government announces fresh buy back of bonds despite lukewarm response

The central bank said it would buy back Rs 60,000 crore worth of securities, maturing this financial year, on May 21

Govt bonds

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The Indian government announced a third buy back of bonds this month after the first two attempts were met with a tepid response.
 
The central bank said it would buy back Rs 60,000 crore worth of securities, maturing this financial year, on May 21.
 
The securities offered for buy back are 7.35 per cent 2024, 8.40 per cent 2024, floating rate bonds (FRB) 2024 and 9.15 per cent 2024, the Reserve Bank of India said in a statement.
 
Earlier in the day, the central bank accepted bids to buy back only Rs 2,070 crore ($247.96 million), a fraction of the total buyback of 600 billion rupees offered.
 
"Most banks are out of money on these bonds. Why will anyone want to sell these bonds at a loss," a senior treasury official at a large state-run bank said.
 
"They can easily hold these bonds till maturity and get the face value at least," the person added.
 
In a previous auction on May 9, the central bank accepted bids to buy back government bonds worth Rs 10,510 crore, far below the notified amount of Rs 40,000 crore.
 
The choice of new securities offered for buy back is better than the last two, as they are in the money, so at least chances of success rise, a trader with a private bank said.
 
The central bank can choose to accept the higher prices demanded by the banks if it was looking at purely infusing cash into the banking system, but that would also push down yields for these papers by a large margin.
 
"They would not want to accept higher prices being demanded and do a 25 basis points rate cut without actually cutting rates," the senior treasury official added.


(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: May 17 2024 | 8:55 AM IST

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