RBI Treasury Bill & Bond Auction Update: T-Bill Yields 6.7-7%, SDL 7.54% For 20 Years

Yields on government securities have been falling in recent weeks as the Reserve Bank of India (RBI) makes a strategic pause in repo rate hikes to give a fresh boost to the economy.
RBI Treasury Bill & Bond Auction Update: T-Bill Yields 6.7-7%, SDL 7.54% For 20 Years

Here comes the Reserve Bank of India’s (RBI) yet another weekly auction of Treasury bills (T-bills) and state government bonds. If you have missed out last time, so here’s the opportunity.

In next week’s auction, the highest indicative yield for T-bills is 7 per cent, and for state government bonds, it is 7.54 per cent.

The bidding ends on May 3, and the settlement date is May 4. UPI customers can book the bidding amount by 8 am on May 3, and net banking customers can do it by 11:30 pm on May 1.

In T-bills, the indicative yields for three months, six months, and 364 days are 6.78 per cent, 6.95 per cent, and 7.00 per cent, respectively. However, T-bill yields have been falling in recent weeks as RBI makes a tactical pause in repo rate hikes to give a fresh boost to the economy.

This time, both central and state governments are issuing bonds. The central government bonds are medium- to long-duration, maturing on April 10, 2028, February 6, 2033, and September 12, 2052, with an indicative yield of 7.00 per cent, 7.12 per cent, and 7.27 per cent, respectively.

Similarly, Punjab and Tamil Nadu have announced government bond or state development loan (SDL) auctions for varying durations. Punjab bonds will mature on April 12, 2033, April 19, 2038, and May 3, 2043, with indicative yields of 7.48, 7.50, and 7.54 per cent, respectively. Tamil Nadu’s government bonds will mature on May 3, 2033, at 7.45 per cent yield.

Repo Rate & Future Yields

In its monetary policy committee (MPC) meeting minutes released this month, RBI noted that it would closely watch the inflationary pressures given the continuing headwinds facing the economy even as it decides on a temporary pause of its repo rate hikes.

RBI kept the rate untouched for the first quarter of fiscal 2023-24 after consecutive hikes over the past quarters to calm inflation. Due to the spike in repo rate, government securities (G-secs) had seen a record rise in yields. Banks also increased their lending rates, raising concerns in some quarters that it may negatively impact borrowers, especially home loan customers.

Says Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP, a fixed income advisory firm, “The yields came down sharply due to positive market sentiments, which reflected in the weekly RBI bond auctions. The yields have declined majorly due to the market expectation of a continued repo rate pause as against MPC’s hawkish view.”

Further, he says that the repo rate has also been fuelled due to ample liquidity in the banking system, lowered state governments’ borrowing (SDL) as against the scheduled calendar borrowing, increased investment appetite from mutual funds due to large inflows in March, expectations of rate pause from the US Fed, and fewer investment opportunities for investors due to starting of the financial year. Srinivasan adds: “The bond market will continue to trade range bound with upward bias tracking external and internal factors, including inflation and subsequent Fed and MPC statements.”

Related Stories

No stories found.
Outlook Business & Money