RBI accepts 20 bps higher treasury bill cutoff yields than last auction

Mumbai: The Reserve Bank of India has accepted treasury bill cut off yields 20 basis point higher than the previous successful auction, after cancelling the auction last week.

Treasury bills - bonds with a tenure of less than one year - jumped to their highest level in nearly two years, as near deficit liquidity and high oil prices have sealed another 50-75 basis points hike, traders said.

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The 91-day cutoff yield came in at 5.93%, while the 182-day cutoff yield was at 6.54%. The 364-day t-bill yield was at 6.69%, RBI data showed. These yields are about 20 basis points higher than the previous successful t-bill auction.

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The central bank had cancelled the auction in the week of October 21 due to high yields, which were about 15 basis points higher than the previous week.

"Liquidity tightening and high oil prices have intensified short-term funding pressures, prompting traders to demand a higher liquidity premium and triggering higher yields in the t-bill", a trader from a primary dealership said. System liquidity has hovered at a surplus of around ₹35,000 crores, from a large surplus last month. The daily average surplus in October so far stood at ₹2.6 lakh crore, versus ₹7.8 lakh crore in September. The 10-year yield closed at 7.44% on Wednesday.