The Reserve Bank of India on Wednesday accepted lower than the notified amount for 182-day treasury bills, for the first time in 2-years at the auction after investors demanded higher yields on liquidity crunch and rate hike fear, dealers said.
RBI rejected half of the Rs 20 billion notified amount for 182-day T-bill after awarding the cutoff yield at 6.8225% compared to the previous auction cutoff of 6.5655% held a fortnight earlier. Poll of 17 dealers and banks expected the cutoff at 6.70%.
This was the first time since October 3, 2008 that RBI had rejected bids at a T-bill auction. ?The rejection is a good sign and will lower the expectation of yields at the next T-bill auction,? said a state-run bank owned primary dealer.
At the auction held on October 3, 2008 RBI accepted merely Rs 5 billion worth of 182-day T-bill as against the notified amount of Rs 20 billion. The cutoff was awarded at 9.01% yield. A key reason for investors demanding higher yield at the T-bill auction was continued liquidity crunch and expectation of rate hike at the Nov 2 policy review. The expectation of rate hike is gathering momentum on fears of elevated inflation, a slowdown in August IIP.
