Mumbai, Aug 21: Two short-term treasury bills auctions devolved on Friday. Despite a massive hike in the yields of 14-day T-bills by 131 basis points and 91-day T-bills by 25 basis points, both the instruments devolved wholly on the Reserve Bank of India. However, at the 8 per cent fixed rate three-day repo, the RBI sucked out Rs 2,860 crore.The central bank hiked the notified amount of the 91-day T-bills by Rs 100 crore to Rs 500 crore. It fixed the yield of 14-day T-bills at 8.10 per cent and that of 91-day T-bills at 8.01 per cent, up from 6.79 per cent and 7.76 per cent, respectively.
According to money market sources, both the T-bills devolved on the central bank because the players were not interested to pick-up the 14-day and 91-day t-bills at such low rates as the short-term instruments were trading in the secondary market in the region of 12-16 per cent.
Moreover, the term money market revived after the call rates in the inter bank money market hit a high of 40 per cent. Banks were striking deals for 10-15 days at 13-15 per cent. "If a bank can lend 15 day money at 13-15 per cent why should it invest in the 14 day T-bills", a dealer in a primary dealer said.
At the 14-day T-bills auction, the central bank received two competitive bids worth Rs 30 crore and one non-competitive bid worth Rs 400 crore for a notified amount of Rs 500 crore. The entire amount of the 14-day T-bills devolved on the central bank.
At the auction of the 91 day T-bill, the RBI received three competitive bids worth Rs 45 crore and three non-competitive bids worth Rs 225 crore for a notified amount of Rs 500 crore. The entire amount of Rs 500 crore devolved on the Reserve Bank. The cut-of-price for the 91-day t-bills was pegged at Rs 98.04.
According to money market sources, the yield offered by RBI is not keeping in line with the market rate. "But as the central bank has also increased the interest rate on the short fixed rate repo by 300 basis points to 8 per cent, a hike in the t-bills yields was expected in line with other short term instruments," said market dealers.
Last week, RBI had hiked the cut-of yield of 14-day T-bills and 91-day T-bills by 78 basis points and 25 basis points to 6.79 per cent and 7.76 per cent signalling a higher interest rate at the shorter end. It had also hiked the notified the amount for the 91-day treasury bills by Rs 200 crore earlier to Rs 400 crore.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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