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Fixed Income

91-day T-Bill Yields Soften Below 11%. Expecting Easing Rates?


After crossing 12% in yield just two weeks ago, the 91 day T-Bill auction has cooled down to a 10.6% yield in the auction yesterday.

91 day T-Bill Auctions Chart

T-Bills are short term borrowings of the government. Typically, less than 365 days. The 91 day T-Bill is auctioned every week (for about 7,000 cr. a week). The yield is based on the rate that was decided as a “cut off”.

You and I can also buy them. However it’s a painful process and requires us to go through hoops to borrow, because we need an SGL account and a participating bank, along with extensive KYC etc. This process, if made electronic can ensure greater participation.

(After all, why should I park my money in a savings account in a bank at 4%, when the government is willing to pay 10.6% for 91 days?)

The other thing is that the RBI has been accepting way more than is “notified”. But yesterday, not enough bids came in. Liquidity is hurting all right.

91 Day T-Bill Auction Size Chart

The lowered yields might be an indication of some stability, or it might just be a precursor to a change in rates after Rajan gives his maiden speech on policy on September 20. Or, it might be a temporary outlier.

However, it does seem like yields across the shorter end of the spectrum (Certificates of Deposit, Commercial Paper, CBLO etc.) are between 10.25% and 11%, where till recently the range went all the way to 12.5%.


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