T-bill yields ease across maturities with auction seeing full subscription

The Central Bank managed to successfully raise Rs.80 billion from the weekly bill auction held yesterday, with yields coming off from the recent highs reached two weeks ago, due to the heightened concerns over the possibility of a likely restructuring of domestic debt as part of the debt restructuring now underway. 

The Central Bank yesterday issued Rs.80 billion in bills across the three maturities, offering Rs.35 billion in three-month bills, Rs.25 billion in six-month bills and Rs.25 billion in 12-month bills.

However, as typically seen in all recent auctions, the three-month bill received the bulk of the bids, exceeding the offered amount nearly four times. The Central Bank raised Rs.78.88 billion under this tenure at a weighted average yield rate of 32.71 percent, 18 basis points lower from last week’s auction. 

The accepted amounts under the remaining two tenures were as little as Rs.523 million (six-month) and Rs.596 million (12-month) raised at weighted yields of 30.82 percent and 30.26 percent, each down by 46 basis points and 30 basis points, respectively. 

Last week, the weighted yields at the auction held steady across the three tenures, as the Central Bank rejected most of the bids received far in excess of the yields it desired to raise. 

While it isn’t entirely clear what led to the change in risk sentiments by the investors and primary dealers from last week to this week, still no one knows if the rupee debt could be part of the debt restructuring. 

However, there is strong push back from the local financial sector experts against the rupee debt restructuring, as such an event could severely hurt the banking and financial sector by eroding their capital base.

Meanwhile, the Central Bank on Tuesday raised Rs.48.7 billion in three-year bonds and 10-year bonds, at weighted average yields of 29.16 percent and 29.96 percent each, with the bulk of Rs.45 billion raised from the latter. 

The Central Bank issued Rs.30 billion and Rs.45 billion in three-year and 10-year bonds and accepted only Rs.3.7 billion under the former while the latter saw the full acceptance.