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Sebi auctions $9.34 bn Govt bonds for FIIs

In signs of imminent revival of overseas interest in government securities, an auction for investment limits in such bonds was oversubscribed on Tuesday by FIIs with bids worth a record $10.4 billion. The auction was held by capital markets regulator Sebi on the stock exchange platform for FII investment limits in government debt securities worth $9.34 billion (Rs 58,264 core) and got $10.4 billion (Rs 64,908 crore) bids.

This is the biggest ever auction for such bonds, which exceeds the last record Rs 42,022 crore  auction on June 20, and negates the prevailing concerns in markets on foreign investments. The auction results come in the backdrop of FIIs having turned net sellers for two and half months in the debt market after huge net inflows in the first 5 months.

As per auction details, as many as 40 bids were received and 39 of them were declared successful with allocation of investment limits for government debt securities worth Rs 58,264 crore.
The robust response to Sebi auction comes at a time when concerns are being raised about huge outflows of foreign funds and weakness in domestic markets and the overall economy. Interestingly, the FII interest has been strong in such auctions for many months now, including in July when they put in bids worth over $4.3 billion in an auction for debt securities worth $3.96 billion.

Prior to that, the auction of Rs 42,022 crore worth bonds was also subscribed almost fully in June, when bids were received for about Rs 39,171 crore. However, FIIs have been pulling out money from overall debt markets in recent months. Last month alone, they pulled out over Rs 12,000 crore.
The weakness in the Indian currency has been instrumental in overseas investors exiting debt markets as the rising cost of hedging a volatile rupee hurt the yield differential the FIIs work with.
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