RBI Shocks Market: Zero Bids Accepted in Treasury Bill Auction
The RBI accepted zero bids in its latest treasury bill auction despite high demand, as 10-year bond yields climb to 7.44%.
In a surprising turn of events for the government securities market, the Reserve Bank of India (RBI) has accepted no bids in its latest auction of Treasury bills. This decision comes despite a significant surge in competitive bids that far exceeded the amounts the central bank had originally notified for borrowing, signaling a complex moment for India's financial landscape.
The Numbers: Demand vs. Acceptance
The RBI had set out to borrow a total of Rs 23,000 crore through three different maturities. The breakdown of the notified borrowings was as follows:
- 91-day Treasury bills: Rs 8,000 crore
- 182-day Treasury bills: Rs 8,000 crore
- 364-day Treasury bills: Rs 7,000 crore
Despite these targets, the appetite from investors was high. For the 91-day bills, the RBI received 67 competitive bids totaling Rs 15,366.60 crore. The 182-day bills saw 63 competitive bids amounting to Rs 18,925.50 crore, while the 364-day bills attracted 75 bids worth Rs 11,352.50 crore.
However, the final auction results revealed a stark reality: zero allotments. The central bank accepted no competitive bids and no non-competitive bids across any of the three maturities. Consequently, no cut-off yields or weighted average yields were reported for these securities.
Non-Competitive Bids Also Ignored
The rejection wasn't limited to competitive bidding. The RBI also turned away a substantial amount of non-competitive bids, which included:
- Rs 12,028.76 crore for 91-day bills
- Rs 1,712.42 crore for 182-day bills
- Rs 1,683.57 crore for 364-day bills
Pressure on Government Bonds
This unusual auction outcome coincides with rising pressure in the government securities market. The yield on India's benchmark 10-year government bond climbed to approximately 7.44 per cent on Wednesday, marking an increase of about four basis points from the previous session.
The upward trend in yields has been consistent over a longer period. Market data indicates that the benchmark 10-year yield has risen by roughly 40 basis points over the last month and has surged by approximately 90 basis points over the past year.
Treasury bills are short-term government securities issued with maturities of 91, 182, and 364 days, serving as a key tool for the government to manage short-term liquidity.
While the market is buzzing with speculation regarding the RBI's decision to reject all bids despite the high volume of offers, the central bank has not specified the reason for the absence of allotments in its official release dated October 21.