The Centre has announced the cancellation of this week’s auction of government bonds, which was slated to take place on February 11. The decision, which was taken in consultation with the Reserve Bank of India, comes as the Centre sees a weak cash position. The move has been seen as an indicator of the government not wanting to allow bond yield rates to climb even higher than the highs that it is currently witnessing.

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“On review of the Government of India’s cash position, it has been decided, in consultation with Reserve Bank of India, to cancel auction of all the Securities scheduled to be held on February 11, 2022 as per the calendar for issuance of Government of India Dated Securities during Second Half of the current Financial Year,” Ministry of Finance said in a statement on Monday evening.

What does this mean?

The government had earlier planned to auction Rs 24,000 crore worth of debt through bond issuance, according to the schedule on the RBI calendar. Around Rs 10,504 crore of this amount was already sold last week, according to auction results published by the RBI on Friday.

But the government may have halted the sale of further bonds as bond yields inched to 6.95 percent on Friday before settling as 6.88 percent at close. This was after bond yields hit a two-and-a half-year high of 6.89 percent on Thursday.

Higher yields mean that the debt burden on the government increases as a result of the bond. The government is looking to keep yields in check and one way of doing this is to restrict further bids of bonds for the time being. The method seems to be already effective as bond yields have started to dip as a result.

The bond yields had seen a jump of 20 basis points (bps) after Finance Minister Nirmala Sitharaman announced during the Budget presentation last week that the Centre would undertake a massive borrowing programme of Rs 14.95 lakh crore in the upcoming fiscal.

Read Also | Explained: How rising bond yields impact stock markets

(Edited by : Thomas Abraham)