Debt instruments issued by the Indian government to raise funds for fiscal expenditure are placed among the most secure investment vehicles in the country. But prices of long term bonds have tumbled, as the assets closed the day on a mixed note, because of weak investor demand. The market sentiment, not too enthusiastic about the government debt instruments, was reflected during a weekly gilt auction worth Rs 30,000 crore.
The benchmark bond ended at at Rs 100.25 compared to Rs 100.33 a day before. The government sold 2024 bonds worth Rs 40 billion rupees and 2029 bonds worth Rs 60 billion and 20136 bonds worth Rs 110 billion.
Dealers had expected stable demand for long-term gilts initially just like it was in previous auctions, and that had increased gilt prices on Thursday. But auction results showed low market appetite, particularly for 2036 bond, at current market levels.
Public sector banks stayed sidelined on falling yields, and traders rushed to book profits since bidding ended with the view that demand could not sustain.
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