FIIs offload Rs 400 cr t-bills

Foreign institutional investors (FIIs) today sold treasury bills worth Rs 400 crore following a bearish outlook in the government securities market.

According to custodian foreign banks, which operate on behalf of FIIs in the debt market, the heavy selling followed the sharp depreciation in spot rupee from 43.92 last week to a low of 44.34 today. FIIs took the opportunity to book profits in t-bills, said a dealer.

Another reason cited by dealers was that the market had already factored in a 25 basis points hike in reverse repo in the forthcoming credit policy. One basis point is one hundreth of a percentage point.

At the auction of dated government securities held on Thursday, the market was expecting either a devolvement on the RBI or a higher cut-off yield in 11.83 per cent 2014 paper.

"If this happens, the yield at the shorter end will go up leading to losses in the treasury bills portfolio," said a dealer. Debt FIIs have heavily invested in treasury bills.

According to market dealers, the RBI might set a cut-off yield of 7.28 per cent for the 11.38 per cent 2014 paper, which is a high premium paper.

Thus, it has been priced almost 25 basis point higher than the yield of 7.06 per cent for the most liquid 7.37 per cent 2014 gilt. The rupee slipped to 44.34 to a dollar after opening at 44.20/21 and closing at 44.28/29. The market got jittery following the negative FII inflows over the last two days,.