Govt to auction Rs 4,000 cr gilts

"There is not enough liquidity to see a Rs 4000 crore issue go through. A long-term paper is likely to keep away investors as no one wants to take a long term view," a money market dealer in a private bank said. Prices of short- and medium-term securities fell today by 10-15 paise across the board while no one was willing to take position in the long-term securities.

"There is selling pressure asforeign banks are still shaky about investments in India," a dealer said.

Sources said that the government has been forced to come out with a market borrowing four days ahead of the budget as it must have exceeded its ways and means advances (WMA) limit. As on May 1, the Centre’s recourse to the WMA stood at Rs 10,594 crore. The WMA limit for the first half of the current fiscal is pegged at Rs 11,000 crore and according to the agreement — reached between the RBI and the government — if the Centre avails of 75 per cent of the WMA limit, fresh floatation of government paper is triggered.

"The timing is not suitable for a borrowing. The market is facing liquidity problems as rates might look northwards," a dealer in a primary dealership said. The government has so far raised Rs 16,000 crore through four market issues and privately placed another Rs 5000 crore with the RBI.

In the interim budget, the gross government borrowing programme has been projected at 86,000 crore while the net borrowing is peggedat Rs 55,000 crore.

Of the five issues this fiscal, the Rs 4000 crore eight-year paper devolved on the primary and satellite dealers. At that point of time, the RBI hiked the commission to 69 paise to see the issue go through. Dealers said that the RBI is likely to hike the rate of commission once again to this level from the 44 paise doled out in the last six-year paper auction.