T-Bill Auctions Devolve On Reserve Bank

The implicit cut-off yield at the auction of 14-day treasury bills yesterday was hiked to 6.80 per cent from 6.01 per cent and at the 91 day T-bills was upped to to 7.77 per cent from 7.52 percent. Despite the increase in the cut-off yield, both auctions devolved.

The devolvements were not taken by primary dealers but the RBI, to the extent of Rs 25 crore in the case of 14 day T-bills and Rs 160 crore in 91 day T-bills. The hike in yields was forced by the market. But the willingness to give a higher yield shows that the RBI might not be averse to hike interest rates if currency markets are volatile.

 

Last week, the RBI had lowered the implicit cut off yields on 14 day and 91 day T-bills from 6.27 per cent to 6.01 per cent and 7.73 per cent to 7.52 per cent. "The market has demanded a higher implicit cut-off this time in the light of the rupee volatility and its impact on forwards and hence interest rates," said a dealer.

At the auction of 14 day treasury bills, the RBI received seven competitive bids for Rs 525 crore

against the notified amount of Rs 500 crore. At the implicit cut off yield of 6.80 per cent, six bids for Rs 475 crore were accepted.

The RBI did not receive any non-competitive bids. The weighted average implicit yield was lower at 6.53 per cent, indicating that there were bids at lower rates also.

At the auction of 91 day treasury bill, against the notified amount of Rs 400 crore, RBI received five competitive bids for Rs 240 crore. At the implicit cut off yield of 7.77 per cent, all bids were accepted.

The RBI received one non competitive bid for Rs 100 crore. The implicit weighted average cut off was also 7.77 per cent.