RBI rejects Treasury bills bids at weekly auction amid tepid demand

Rupee depreciated for second consecutive trading session post US President Trump's tariff proposes

The Reserve Bank of India (RBI) on Wednesday rejected bids for the 182-day and 364-day Treasury bills (T-bills) at its weekly auction, as bids for the papers were seen coming in at elevated yields, dealers said.

 

The cancellation came amid a broad-based selloff across domestic financial markets.

 

Escalating tensions in West Asia pushed crude oil prices higher, while concerns over US President Donald Trump's latest tariff proposals weighed on investor sentiment.

 

Yield on the benchmark 10-year government bond settled at 7.03 per cent, against the previous close of 7.01 per cent.

 

The rupee weakened for the second consecutive session and closed at 95.71 per dollar, against 95.27 in the previous session.

 

 

“The rupee fell for the second consecutive session, weighed down by capital outflows and mounting concerns over US President Trump's latest tariff proposals. Escalating tensions in West Asia also pushed crude oil prices higher, further denting investor sentiment. Additionally, a stronger US dollar and rising bond yields continued to pressure regional currencies on expectations of hawkish central banks,” said Dilip Parmar, research analyst, HDFC Securities.

 

In the T-bill auction, the central bank accepted bids worth ₹12,000 crore for 91-day T-bills. The government had planned to raise ₹24,000 crore through the sale of 91-day, 182-day and 364-day T-bills. Earlier, on March 25, the RBI had cancelled the weekly T-bill auction.

 

“The cancellation was not really a yield signal; it was more a reflection of poor demand. There was a clear shortage of bids, especially in the 182-day and 364-day segments, as market participants were reluctant to take risk amid uncertainty. Rising crude oil prices and a hardening rate outlook have made investors nervous, which is also evident in the increase in short-term yields and one-year OIS rates,” said a dealer at a private bank.

 

Another dealer said bids for the 364-day T-bill may have come in at around 6.08-6.12 per cent, against prevailing levels of around 6.02 per cent in the secondary market.

 

Accepting such bids would have resulted in a higher cut-off yield, prompting the RBI to cancel the auction. The dealer added that the central bank may have expected yields to decline after the monetary policy announcement.

 

Meanwhile, demand for the 91-day Treasury bill remained in line with market expectations. The cut-off yield eased to 5.56 per cent from 5.61 per cent at the previous auction. Dealers said demand for 91-day T-bills was supported by mutual funds, and the auction received bids of around ₹32,000 crore against the notified amount of ₹12,000 crore.

 

Market participants now closely watch the RBI's monetary policy outcome, foreign institutional investor (FII) flows and the progress of the southwest monsoon. They see immediate resistance for the rupee at 96.50 per dollar and support at 95.10. 

Sensex, Nifty decline after a day’s breather  

Benchmark indices Sensex and Nifty closed lower on Wednesday after a day’s breather, dragged by heavy selling in Information technology (IT) stocks, a fresh spike in crude oil prices and persistent foreign fund outflows. The 30-share BSE Sensex dropped 303.67 points, or 0.41 per cent, to settle at 74,346.17.  

The 50-share NSE Nifty declined 77.95 points, or 0.33 per cent to end at 23,405.60. Among 30 Sensex firms, Tata Consultancy Services tumbled 8.43 per cent, followed by Tech Mahindra , HCL Tech, and Infosys. ITC, Eternal, Larsen & Toubro, and Bajaj Finance were  among the laggards. InterGlobe Aviation, State Bank of India, ICICI Bank and Trent were among the gainers from the blue-chip pack.   (PTI)