Context:
The Reserve Bank of India (RBI) partially auctioned the 10 year sovereign green bonds worth 3,945 crore to primary dealers with an objective to get a greenium or premium pricing for green bonds. The 5 billion USD-INR swap auction however witnessed five times the bids as there is still a huge demand for dollar liquidity.
10-Year Green Bond Auction Partial Devolution
- Auction result
- RBI accepted only 1,054 crore of the notified amount of 5,000 crore.
- Premium pricing attempt
- RBI sought a greenium but bidding remained at market levels.
- Definition of greenium
- The premium investors pay for green bonds due to their sustainability impact.
USD-INR Swap Auction Strong Demand
- Size of the auction
- RBI carried out a $5 billion six month USD-INR buy sell swap
- Oversubscription
- The swap saw bids worth $25 billion (5 times the notified amount).
- Cut off for premium
- Marginally below market levels under a tight liquidity scenario.
- Reason for doing the swap
- Part of RBI’s measures to inject durable liquidity amid a ₹2.2 trillion banking system deficit.
Rupee and Bond Market Action
- Rupee Depreciation
- The INR fell to 86.66 during the day, closing flat at 86.62 per USD.
- Fall in Forward premium
- The 1 year forward premium on the USD-INR went off by 2.24% from 2.27%.
- Bond market steadiness
- No fresh inflows into the Bloomberg Index, with the benchmark G-Sec yield stable at 6.69%.
- Market sentiment
- Treasury heads kept a month end dollar demand and caution ahead of the Union Budget.
