Treasuries threshold yields rise on additional supply, liquidity tightening expectations

“Additional treasury bill offering was announced which caused yields to surge as March tends to be a time of tight cash,” said Lakshmi Iyer, CIO – Debt and Principal Commodities, Kotak Mahindra Asset Management Company.

Expectations of tighter excess liquidity in the banking system and additional supply of Treasury bills (T-Bills) have pushed yields on these instruments up 5 to 15 basis points over the past two weeks. According to data from the Reserve Bank of India (RBI), threshold yields on 91-day Treasury bills rose by 12 basis points, 182 days (19 basis points) and 364 days (28 basis points) . points).

“Additional treasury bill offering was announced which caused yields to surge as March tends to be a time of tight cash,” said Lakshmi Iyer, CIO – Debt and Principal Commodities, Kotak Mahindra Asset Management Company.

Last month, the RBI increased the amount to be raised through treasury bills after reviewing the government’s cash position. The Center will collect Rs 7,000 crore through the 91-day treasury bills, Rs 15,000 crore each through the 182-day and 364-day treasury bills. The decision was taken after consultation with the government as it will continue to have the flexibility to change the notified amount and timing of the treasury bill auction based on requirements, changing market conditions and market conditions. other relevant factors.

Additionally, at the end of the quarter, there are huge cash outflows from the banking system due to GST, redemption pressures on mutual funds, among others, which drain liquidity from the system. Market participants expect yields to rise more on the short end of the curve due to tight liquidity and some other domestic concerns. “There’s a good chance we could climb further on the short end of the curve, which could also lead to higher Treasury yields,” Iyer added.

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