T-bill yields continue to decline; interest in long-term bills gathers momentum

Treasury bill yields eased for the second week in a row yesterday after the Central Bank sent a strong signal a fortnight ago that the yields have overshot and hence, it would not hesitate to intervene to stabilise and reverse the trajectory by injecting liquidity. 

The auction also saw the Central Bank accepting all the bills offered for the second consecutive week. Particularly, there was a marked increase in the interest for bills in the longer end of the curve compared to the months-long lacklustre interest shown for six and 12-month bills. 

The three-month bill yield shed another 90 basis points yesterday, settling at 22.75 percent, bringing the cumulative decline in the bill of the shortest end of the tenure to 132 basis points. 

The six-month bill yield also eased 62 basis points to 23.60 percent, bringing the total decline in the two weeks to 109 basis points. 

The benchmark one-year bill declined 55 basis points to settle at 23.75 percent, bringing the two-week drop in the yield to 75 basis points.

 
The Central Bank offered Rs.83 billion in bills under the three tenures— Rs.40 billion under three-month bills, Rs.23 billion under six-month bills and Rs.20 billion under one-year bills. 

Investor interest was visible for bills under all three tenures but the Central Bank accepted more under six-month and 12-month bills and less under three-month bills than what it offered, quite a reversal from the shorter end tilt seen in the auctions thus far. 

Accordingly, the Central Bank accepted Rs.20.6 billion under one-year bills, Rs.25.2 billion under six-month bills and Rs.37.2 billion under three-month bills. 

The government on Tuesday announced to raise both indirect and direct taxes, reflecting its desire to fix the budget through revenue-enhancing reforms.