T-bill yields continue to decline at final auction of 2022

The Central Bank sold Rs.98.0 billion in bills at the primary Treasury bill auction held yesterday, where the yields slipped from last week, continuing the weeks-long declining streak into the final bill auction for 2022. 
The Central Bank offered Rs.50 billion in three-month bills, Rs.25 billion in six-month bills and Rs.23 billion in 12-month bills.

However, it tilted towards short-term bills, accepting Rs.83.9 billion under three-month bills, as was the case in all previous bill auctions. 

The acceptances under the other two tenures were as little as Rs.8.17 billion and Rs.5.85 billion each. 
The Central Bank tilts more towards the short end of the yield curve when accepting bids, as it believes the yields, which have come off a peak recently, would continue to decline in the period ahead, in lockstep with inflation, which began trending down from October onwards and the relative improvement in the money market liquidity levels. 

However, there is some uncertainty if the current disinflation path would persist in the next few months, as the government is adamant on raising the electricity tariffs again by a massive 65 percent from January onwards, less than five months into the previous 75 percent on average increase in electricity bills in August. However, as food accounts for a bigger share of the consumer inflation basket and food prices are deflating since of late, it is unlikely that the proposed electricity tariff hike would disturb the disinflation path. Yet, the tariff increase would hurt households and businesses that are already grappling with the worst economic conditions. 

Meanwhile, at the bill auction held yesterday, the yields came off by three basis points under all three tenures. 
The three-month bill shed three basis points to settle at 32.64 percent, the six-month bill gave up a similar amount to end at Rs.32.20 percent while the benchmark 12-month bill slid to 29.27 percent, from 29.30 percent last week.