T-bill yields rise as investors favour high-yielding, long-term bonds

For the second consecutive week, yields increased at the weekly bill auction, indicating tight liquidity in the system and a preference among investors for bonds, which continue to offer relatively higher yields for longer tenures. 
This trend comes in light of the recently announced domestic debt restructuring plan, which has been better than initially anticipated.
During the bill auction conducted yesterday, the yields experienced an increase across the three different maturities, ranging from 31 basis points to 91 basis points. However, this rise was more moderate compared to the sharp surge observed a week ago. 

Specifically, the three-month bills saw a rise of 91 basis points, settling at 19.99 percent; the six-month bills gained 82 basis points to end at 17.77 percent and the benchmark one-year bill rose by 31 basis points to close at 14.35 percent.
The Central Bank issued Rs.160 billion in bills, with Rs.70 billion under three-month, Rs.50 billion under six-month and Rs.40 billion under 12-month bills.    
But it accepted only Rs.63.7 billion in total, with Rs.40.3 billion, Rs.12.8 billion and 10.5 billion under each tenure. This marked the second consecutive auction where the amount accepted fell short of the initial offering.

With yesterday’s gains in bill yields, the three tenures have added 220 basis points, 184 basis points and 49 basis points in total in the two weeks since the Central Bank cut policy rates earlier this month.
At the first bill auction held since the final blueprint for the domestic debt optimisation was announced, the yields plummeted from their recent peaks with the shedding of the risk premia associated with the uncertainty that surrounded the domestic debt restructuring process. 
The reopening of bond auctions since then shifted the investor appetite towards bonds, which are still offering relatively higher yields compared to bills, which provide safeguard against still red-hot inflation, despite the official indices coming in softer. 
The Central Bank is currently pursuing its most rapid monetary loosening cycle, which began in June, aimed at unleashing the dormant potential of the economy, which has been restrained for an extended period.