- Wealth PMS (50L+)
Every week, the RBI conducts auctions selling 91 day T-Bills and in alternate weeks, 182 day and 364 day T-Bills. These are quite short term and is part of the government borrowing. The yields give you an indication of how expensive credit is – remember this is really short term, and then, sovereign debt, meaning it carries the least credit risk for a very short period.
With more than 2 lakh crores is in outstanding T-Bills, and 25,000 cr. in outstanding “Cash-management bills”, all yielding above 8.6%, the credit system is now getting squeezed.
Why should it matter to you? The higher this yield – and the government is the most reliable borrower of rupees – the higher the rates other entities have to pay, like banks, corporates and so on. With the 182-day T-Bill auctioning at higher than the 10 year yield (currently 8.90%), it means the system is very tight about money. Traditionally, such a squeeze has been very bad for corporates and thus, for equity markets.