364-Day Paper Cut-Off Kept At 8.98%

The Reserve Bank of India (RBI ) has retained the cut-off at 8.98 per cent of the latest round of 364-day Government of India (GoI) treasury bills auction.

The cut-off price at the auction conducted yesterday was Rs 91.76.

The RBI received a total of 13 bids for an aggregate amount of Rs 320 crore of which only one bid was accepted for Rs 100 crore. The response is surprising since the secondary market yields are in the region of 9.30 per cent.

The latest round of auction has elicited a slightly better response than the earlier round in which the RBI received bids for Rs 371 crore of which Rs 35 crore was accepted at the same price and yield of Rs 91.76 and 8.98 per cent, respectively.

 

The higher call rates have resulted in the slackened interest in the last two auctions and this is reflected in the poor response.

The call rates ruled in the region of sub 1 per cent levels at the start of this financial year and currently is in the five per cent range . Once the call rates went up the interest in the treasury bills went down which is reflected in the sharp reduction in the bids accepted at Rs 35 crore in the auction conducted on May 7 1997 against Rs 2,893 crore on April 23, 1997.

The market expectations were that given the higher call market rates the RBI would align the yields on the 364-day treasury bills favourably.