Refer this latest press release of SEBI (SEBI Circular) on enhanced FII debt limit wherein each head is described to its best. One can understand broadly which securities are included under different segments identified by the watchdog. Auction is scheduled on every 20th. FII debt limit auction could be held on the next working day in case 20th happens to be a holiday. Auctions would be held on recognized exchanges like BSE and NSE if free limits greater than Rs1000 crore are available for any of the three categories — Government Securities (G-Sec), corporate bonds and long-term infrastructure corporate bonds. One has to bid in premium terms. FIIs have to utilize these limits within 90 days in case of corporate debt and long-term corporate infrastructure debt. The time period for utilizing G-Sec limits is 45 days. FIIs bid in bps as premium to actual yield. When they feel bonds are undervalued they probably bid with higher premium and vice versa. If an FII bid for Gsec at 8bps then that signifies that he/she is willing to buy Gsec (which is currently trading at 7.5%) at 7.42%. These figures are not released by the exchange and are difficult to find on SEBI’s portal. An FII can let the auction limit get lapse but that doesn’t mean that they will be refunded with their bid premium.
More about Kush Sonigara on Google+