The 30-year paper had a notified amount of Rs 5,000 crore and received bids worth Rs 10,943 crore in the auction scheduled on Friday. The bids for yields were probably higher than the RBI’s comfort level, traders said.
“We had a rate cut when the crude oil prices were low. But now the rupee has weakened so people would have wanted higher yields,” the chief investment officer of an insurance company said on condition of anonymity.
Insurance companies are the primary takers of green bonds as they have to invest a minimum of 15% of their assets under management in the ‘infrastructure and housing’ category, as defined by Insurance Regulatory and Development Authority of India. Since green bonds qualify for this, insurance companies have a natural demand.
Geopolitical tensions in West Asia have added pressure on bond yields. Israel’s strikes on Iran’s nuclear and military facilities have led to a surge in crude oil prices. “Today was just a bad day for this auction,” said a bond trader, who did not wish to be identified.
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The 10-year benchmark government security closed at 6.36%, up two basis points from its previous close. A basis point is a hundredth of a percentage point. The auction was cancelled as there was no devolvement of the notified amount on primary dealers.
