India Raises 21,850 Crore Rupees in Treasury Bill Auction, Yields Reach 6.6900%
Key Facts
The Reserve Bank of India raised 21,850 crore rupees in a Treasury bill auction on October 28, against an announced amount of 23,000 crore rupees, according to data published by Capital Market. The bank accepted bids below the amount on offer, and the auction that day was not canceled. The cut-off yield was 5.9337% for 91-day bills, 6.5493% for 182-day bills and 6.6900% for 364-day bills. The results reflect the yield levels at which the bank accepted bids across the three tenors. The auction came two weeks after an earlier sale that recorded lower yields across all tenors.
At the October 14 auction, cut-off yields were 5.73% for 91-day bills, 6.29% for 182-day bills and 6.49% for 364-day bills, according to a Reuters report published by Moneycontrol. Compared with the October 28 results, the yield on the shortest-tenor bills rose from 5.73% to 5.9337%. The yield on 182-day bills also moved from 6.29% to 6.5493%, while the yield on 364-day bills climbed from 6.49% to 6.6900%. The comparison places the late-October auction within a rising-yield trend seen in previous weeks, with the bank continuing to accept bids across all three tenors.
In the five weeks ended October 14, cut-off yields rose by 64 basis points for 91-day bills, 83 basis points for 182-day bills and 69 basis points for 364-day bills, according to the same report. The largest increase was in the medium tenor, while the shortest tenor posted the smallest rise of the three. The gap between the yield on 364-day bills and the central bank's repo rate stood at 99 basis points in the week before the October 21 report, its highest level in four years, according to Reuters. This showed the widening spread between the yield on longer-dated bills and the repo rate during that period. These levels provide context for the yield trend preceding the October 28 auction.
Avnish Jain, head of fixed income at Canara Robeco, said markets expected further rate increases of at least 75 basis points, making bidding for bills more cautious, according to Reuters. A trader at a private bank was quoted as saying demand may have been weaker than expected. The trader added that the government had no pressing funding needs and that canceling the auction would have been a “better signal” in those circumstances. These remarks concerned the previous week's auction, which was reported to have been canceled, and do not apply to the October 28 auction, whose results were announced and in which bids worth 21,850 crore rupees were accepted. The canceled auction in the earlier period should therefore be distinguished from the auction held on October 28.
In the government bond market, the yield on India's benchmark 10-year bond closed at 7.44% on October 21, compared with a previous close of 7.39%, according to Business Standard. The 7.44% level was the highest since November 4, 2022, the newspaper reported. The yield thus rose between consecutive closes, at a time when Treasury bill yields across the short, medium and long tenors had increased in the five weeks through October 14. The benchmark bond data are from October 21, while the latest bill auction results are from October 28. Together, the figures provide a contemporaneous picture of a period in which yields on Indian government debt rose across different maturities.