Capitalmind
Capitalmind
Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial
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.

divider

Subscribe to Capital Mind:

To subscribe to new posts by email, once a day, delivered to your Inbox:

[wysija_form id=”1″]

Also, do check out Capital Mind Premium , where we provide high
quality analysis on macro, fixed income and stocks. Also see our
portfolio which has given stellar returns in our year, trade by trade
as we progress. Take a 30-day trial:

[wysija_form id=”2″]