India’s Treasury Bill Yields At Near Two-Decade Lows

Flush with liquidity, Indian banks and mutual funds continue to buy short-term government debt aggressively, pushing rates down to nearly two decade lows.

At the latest auction, on Wednesday, rates on 182-day treasury bills and 364-day treasury bills fell to the lowest since 2000, from when data is available on Bloomberg. The 91-day treasury bills are a whisker above the previous lows hit in 2009.

During auctions conducted by the RBI on June 24:

• Yields on the 91-day T-Bill fell to 3.19%, a few basis points above the historic low of 3.15% hit in September 2009.
• Yields on the 182-day T-Bill fell to a historical low 3.42%, the lowest since 2000. The previous historical low of 3.46% was hit in July 2009.
• Yields on the 364-day T-Bill fell to 3.54 %, also the lowest since 2000. The previous historical low of 3.68% was hit in July 2009

Equally notably, the 91-day treasury bill yield continues to remain below the reverse repo rate of 3.35%.

The auction continued to attract heavy bidding as banks and mutual funds see central and state government bonds as a safer option.

The 91-day treasury bill saw over Rs 87,000 crore worth of bids compared to a total of Rs 15,000 crore up for auction, according to the RBI. Similarly, the 182-day bills received over Rs 64,000 crore worth of bids compared to Rs 16,000 crore worth of paper on offer and the 364-day bills received over Rs 50,000 crore in bids compared to the auction size of Rs 14,000 crore.

The strong demand has kept rates low despite an increase in supply.

Between April and June 24 this year, the government has raised over Rs 1.99 lakh crore in 91-day T-Bills, over Rs 1.76 lakh crore in 182-day T-Bills and over Rs 1.56 lakh crore in 364-day T-Bills, according to the RBI. In comparison, the government raised Rs 1.89 lakh crore worth of 91-day T-Bills, around Rs 92,622 crore worth of 182-day T-Bills and Rs 54,245 crore worth of 364-day T-Bills during the same period last year.