The market wanted to trade off immediate liquidity with a higher yield, but that would have pushed up the yields on the longer dated securities, which the RBI was perhaps not agreeable to.
The Reserve Bank did not offer the originally planned Rs 30,000 crore of securities for conversion into longer dated securities. It, however, accepted switching for only Rs 7,866.73 crore, the auction results showed.
After stating last week that it would be converting Rs 30,000 crore of securities maturing in June to longer dated securities, including Rs 4,000 crore into a 40-year security, the RBI offered only Rs 9,796.7 crore of securities in its Monday auction.
The RBI did not accept any offer for a conversion of Rs 13,000 crore to the 10-year security. It accepted Rs 5,736.7 crore for conversion to a bond maturing in 2024.
The amount of conversion offer accepted for the 40-year security was Rs 2,130 crore, against Rs 13,000 crore planned. The RBI decided to give 6.7 per cent for the paper.
Bond dealers said the market wanted the RBI to offer them higher coupon for the switch, as the source security is maturing just next month.
The market wanted to trade off immediate liquidity with a higher yield, but that would have pushed up the yields on the longer dated securities, which the RBI was perhaps not agreeable to, as it has to keep yields low for the Rs 12 trillion borrowing programme of the government to sail through.