Treasury Bills, Bonds Shine On Repo-Rate Surge; Should You Buy Them Now Or Wait?

T-bill enthusiasts could be in a celebratory mood amid an apparent unexciting spell in stocks, as government security yields meet or exceed expectations, driven by back-to-back repo rate hikes.   
Treasury Bills, Bonds Shine On Repo-Rate Surge; Should You Buy Them Now Or Wait?

The Reserve Bank of India’s relentless repo rate hikes have brightened the yield prospects for various money market instruments of late, and guess what? They go beyond savings and fixed deposit schemes.  

Government securities (G-Secs) are back with a bang, even as banks go for a kill, offering customers hard-to-miss interest rates on fixed deposits and other similar financial products.  

Short-term treasury bills (T-bills) and central and state government bonds have raced passed the 7 per cent mark for most maturities as they step up the gas pedal to match their market peers.  

RBI announces the auctions for T-bills and bonds with their coupon type and indicative yields of various maturities every week. So those who missed the bus last time may have a golden opportunity now before the pleasure rides on the back of repo rate hikes bump into a red light.  

In the latest auction, closing on March 15, the central bank is offering an indicative yield of 6.8 per cent on T-bills maturing in three months—likewise, a 7.3 per cent for six months and 7.8 per cent a year.  

The fixed yield on state government bonds maturing in 10 years or more and the super-long tenures of more than the year 2050 ranges from around 7.5 per cent to 7.7 per cent.   

While these government securities haven’t yet breached their own previous record high yields, the indicative returns now are still the best in a long time.  

If you are still dragging your feet, hoping for the return of the good old days—of mega rate offers before getting into the game—think twice, as the window for the best possible returns may be closing soon.  

Let’s look at some offers on the menu. Telangana is offering 7.6 per cent on its government bond, maturing on March 15, 2032. Assam, Mizoram, Bihar, Uttar Pradesh, Punjab, and Maharashtra are giving more than 7.7 per cent on their state government bonds, with tenures up to 2031 or 2039.  

Whether you go for short-term treasury bills or long-duration state government bonds is up to you, but either way, the yields look attractive, and if you have money sitting idle in your bank account, this should be an urgency you should pay attention to.  

Repo Rate Hikes  

RBI has increased the repo rate, at which it lends money to commercial banks, six times since May 2022. It last increased it on February 8, 2023, when it raised it by 25 basis points to 6.5 per cent.   

The higher the repo rate, the higher the borrowing cost—no wonder most borrowers usually fret about taking loans in a high rate situation as if they are budget busters. But it has upsides too.   

Yields on money market instruments like treasury bills, bonds, and bank and post office fixed deposits also increase. So while the devil lies in the details, T-bills could be definitely worth your time and money. 

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