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Fixed Income

91-day T-Bills at 11%, Highest Since 1996


In yesterday’s 91-day T-Bill auction, we saw yields go up to 11.0031%, the highest number since July 1996. Higher yields mean lower prices of the bonds, and effectively means the government is paying a very high price to take short term credit.

91 day T-Bill AuctionsIf this situation continues, the interest paid by the government can be huge. The last auction was on 10th July at 7.48%, before the liquidity squeeze measures RBI took. (One, two)

Also, recently we seem to have been accepting much larger blocks than notified. While only 7,000 cr. was notified in yesterday’s auction, more than 16,000 cr. was accepted. This has been the situation recently, though a higher acceptance has been common.

91 day T-Bill Auction Size

Why is this scary? Because at 11% the government is paying a lot more interest. For 91 days, the interest payout for a 16,000 cr. issue is around Rs. 440 cr. versus Rs. 300 cr. at 7.5%. Effectively we the taxpayers will effectively pay Rs. 140 cr. more for this massive difference in yields.


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