T-bills auction sees firm demand amid lower supply in quarter ending June

The demand at the Treasury bills (T-bills) auction on Wednesday was firm because of lower supply during the second quarter of the current fiscal year, dealers said.

The Reserve Bank of India (RBI) set the cut-off yields on the 91-day, and 182-day T-bills at 6.72 per cent, and 6.83 per cent respectively. These were 4 basis points (bps) lower than last week. The cut-off yield on 364-day T-bill was set at 6.85 per cent, which was 2 bps lower than last week.

The government plans to borrow Rs 3.12 trillion during July-September, which is Rs 24,000 crore of weekly issuance. During April-June, the weekly issuance was Rs 32,000 crore.

 

The government had borrowed Rs 4.16 trillion in the first quarter of the current fiscal year.

A few dealers said that the firm demand for T-bills may help steepen the yield curve in the second quarter.

However, the demand for T-bills depends more on the overall liquidity in the system.

“The cut-off was largely along expected lines,” a dealer at a state-owned bank said. He added, “But, it was a bit more than what the market had expected because the liquidity has eased a bit.”

Liquidity in the banking system continued to stay in the surplus mode as the latest data showed banks parked almost Rs 2.3 trillion with the RBI on Tuesday. This is against Rs 2.2 trillion on Monday.

Banks park Rs 88k cr in VRRR

Banks parked Rs 87,870 crore in the Reserve Bank’s variable rate reverse repo (VRRR) auction against the notified amount of Rs 1 trillion at a weighted average rate of 6.49 per cent.

On Tuesday, VRRR auction saw tepid demand from banks, and they parked only Rs 67,295 crore against the notified amount of Rs 1 trillion.