Banks push RBI to space out G-sec supply into March

Amid hardening bond yields driven by weaker institutional demand and other factors, commercial banks have requested the Reserve Bank of India (RBI) to extend central government bond issuances into March of the current financial year, rather than concluding them in February.

- ANJALI KUMARI & MANOJIT SAHA

This is expected to ease weekly heavy issuance pressure. The central bank held a series of discussions with bond market participants last week, ahead of finalising the borrowing calendar for the second half of the financial year.

They have urged the RBI to conduct all state government securities auctions using the uniform pricing method. Currently, weekly auctions of state bonds follow a multiple price system.

Under the multiple price auction framework, successful bids are accepted based on the yield or price specified by the bidder. In contrast, uniform pricing sees all successful bids allotted at the RBI-determined cut-off yield.

"The request was to switch to a uniform price method as it will help compress the spread," said the treasury head at a private bank. "Uniform price method is good for a high supply and low demand environment," he added.