T-bill yields ease for third consecutive week

The Treasury bill yields continued their descent for the third consecutive week yesterday, as all three tenures shed yields once again amid realisation that the bills had reached their peak levels a month ago after going through a sharp correction in April. 

Bond investors appeared to have also realised that hard economic reforms are likely to happen, as the government is very keen on striking a deal with the International Monetary Fund, with the first tranche expected in August or September. 

 Meanwhile, yesterday’s bill auction saw the full subscription of the entire amount of Rs.98 billion offered by the Central Bank, with interest continuing for the longer tenure bills, a departure from what was seen until a few weeks ago, where the investors made bulk of their bids under the shortest tenure bills. 

The auction saw the three-month bills shedding 84 basis points, settling at 21.91 percent, bringing the cumulative three-week decline in the yield to 216 basis points. 

The six-month bill saw settling 71 basis points lower at 22.89 percent, bringing the total slide in the yield in the last three weeks to 180 basis points. 

The benchmark one-year bill yield slid 62 basis points to 23.13 percent, taking the cumulative three-week decline to 137 basis points. 

The Central Bank offered Rs.40 billion, Rs.30 billion and Rs.28 billion across the three tenures and accepted Rs.55.6 billion, Rs.12.9 billion and Rs.29.6 billion.

The about turn in the bill yields occurred four weeks ago when the Central Bank rejected nearly all bids and made clear that it wouldn’t hesitate to intervene in the market, as it was of the opinion that the yields had overshot.

The full subscription of the bill auctions is a positive sign as it shows that the government could largely meet its funding needs through private savings than relying on the Central Bank liquidity, which are typically inflationary in nature.