Thursday, August 1, 2013

Here's how Telangana Bifurcation Impacted RBI Bond Auction

The proposed bifurcation of Telangana from the state of Andhra Pradesh (AP) impacted the auction pricing of the latter's development loans at the Reserve Bank of India (RBI) on Wednesday. Investors got a higher premium on the cut-off yield at 9.84 percent for tenure of ten years.
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Yield, which is not the same as interest or coupon rate, is the total interest income on a particular security.

AP was raising Rs 1,000 crore loans through the RBI auction process for which the entire volume was sold fully. Last time, the state had raised similar Rs 1,000 crore wherein the central bank had allowed a cut-off yield at 8.25 percent in an auction dated April 23, 2013. However, these two are not strictly comparable due to prevailing liquidity (availability of money) situations in different months.

With the latest yield, according to bond traders, the state beat West Bengal that was offering the highest yield in earlier auctions. The eastern state is now ranked second with a cut-off yield at 9.72 percent in the state loan auctions dated July 31. Continue Reading...

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