Mumbai, July 10: The Reserve Bank of India on Friday hiked the coupon on 14-day treasury bill and 91-day treasury bill by 52 basis points and 42 basis points, respectively, signalling a higher interest rate regime at the shorter end of the market. Despite the hike in interest rates, a substantial portion of both the auctions devolved on the Reserve Bank as well as primary dealers.The hike in short-term instruments is being perceived as a precursor to a hike in the cut-off yield of the 364-day treasury bill. Sources in the money market confirmed that the Reserve Bank was eliciting response from various players in the market to reactivate the moribund secondary market for treasury bills.
The Reserve Bank is yet to tinker with the yield of the 364-day T-bill in the current fiscal. Dealers feel that the central bank might hike the yield next Wednesday. RBI is expected to hike the notified amount for the 364-day T-bill also, sources said.
"One of the suggestions being considered was to hike the notifiedamount and subsequently hike the cut-off yield," a source said. This is likely to bring down government borrowings through government of India securities.
At Friday's auction of the 14-day treasury bill, RBI hiked the coupon rate to 6.53 per cent from 6.01 per cent. Out of a notified amount of Rs 300 crore for the 14-day T-bill, Rs 50 crore devolved on RBI and Rs 150 crore devolved on primary dealers.
The central bank received three competitive bids worth Rs 125 crore and one non-competitive bid worth Rs 150 crore. It accepted two competitive bids worth Rs 100 crore at a cut-off price of Rs 99.75. The sole non-competitive bidder was allotted Rs 150 crore and the weighted average price was Rs 99.75.
At the auction of the 91-day T-bill, the coupon was hiked to 7.77 per cent from 7.35 per cent. Out of a notified amount of Rs 150 crore, the RBI received eight competitive bids for Rs 185 crore and three non-competitive bids for Rs 281 crore. The apex bank accepted six competitive bids for Rs 100 crore and Rs50 crore devolved on the PDs. The three non-competitive bidders were allotted Rs 281 crore. The weighted average price was Rs 98.13.
Money market dealers maintained that the yields offered by the central bank was high but not in tune with the market rates. At present, the 91-day T-bill is traded in the secondary market at 8.5 to 9 per cent level whereas the 14-day T-bill is quoted at 7.5 to 8 per cent level.
On Thursday, RBI raised the notified amounts at Friday's 14-day and 91-day treasury bill auctions to Rs 300 crore and Rs 150 crore, respectively, against Rs 100 crore previously.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
