RBI T-Bill, Bond Auction Update: Indicative Average SDL Yield Is Over 7%, Treasury Bill 6.9%

Of late, government bonds have been a major draw amid economic headwinds and a lacklustre show in the equity market.

The Reserve Bank of India (RBI) announced another weekly auction of treasury bills (T-bills) and state development loans (SDLs) on Friday. Bidding for T-bills runs from May 19-24, and SDLs from May 19 to 23. Yields on T-bills stayed flat in recent weeks amid signs of inflation cooling.

India’s retail inflation in April dropped to an 18-month low of 4.7 per cent from 5.5 per cent in the previous month, mainly due to the easing food prices. The May inflation data due on June 12 is expected to ease further, bringing it closer to RBI’s tolerance level.

For next week’s auction, the indicative yields of T-bills for three months, six months, and 364 days are 6.75 per cent, 6.91 per cent, and 6.90 per cent, respectively. This time, 10 states are offering SDLs, from the shortest duration of five years to the longest of 26 years.

The participating states include Andhra Pradesh, Nagaland, Maharashtra, Haryana, Assam, Rajasthan, Kerala, Uttar Pradesh, Tamil Nadu, and Jammu and Kashmir (J&K). The average indicative yields of all the SDLs are more than 7 per cent. Of late, government bonds have been a major draw for investors amid various economic headwinds and a lacklustre show in the stock market.

Andhra Pradesh is offering an interest rate of 7.4 per cent for its SDL maturing on May 24, 2038, the highest among other states. Its SDL for May 24, 2034, offers 7.39 per cent. Other states like Rajasthan, Assam, Kerala, and J&K are also offering attractive rates.

Inflation & Repo Rate

Some experts opine that yields will continue to decline as the Consumer Prices Index (CPI) improves, and the inflation remains confined to RBI’s acceptance level, which would prompt the bank to start rate cuts.

Since last May, RBI has raised its benchmark repo rate by 250 basis points to 6.5 per cent, pushing the yields on government securities to grow in tow before pausing its rate hikes in April this year. While it has not ruled out another rate increase, it said it would closely monitor inflation.

RBI’s next monetary policy committee (MPC) meeting will occur around June 8. It last held its conclave in April, when it decided to keep the rate unchanged at 6.5 per cent.

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