Mumbai: The non-competitive bidding amount in 91-day treasury bills, in an unusual case, rose sharply on Wednesday as some state governments stepped up investments in these bills, given the higher yields, sources with direct knowledge told Reuters.
The Reserve Bank of India (RBI) has been getting non-competitive bids worth Rs1100-1200 crore in its weekly 91-day T-bill auctions since the last one month.
However, on Wednesday, the RBI accepted Rs7,250 crore from 4 non-competitive bidders under 91-day T-bills and one such bid worth Rs500 crore of 182-day T-bills.
The RBI also accepted the entire Rs8,000 crore of the notified amount under 91-day T-bills under competitive bids and Rs3,000 crore of 182-day bills.
The total amount raised through competitive and non-competitive bidding under 91-day T-bills was Rs15,250 crore and Rs3,500 crore under 182-day T-bills.
“Some states have durable cash surpluses because they can estimate their cash flows better and that is why they preferred to invest in 91-day T-bills rather than in 14-day intermediate T-bills which give them only 5% return,” said one official.
The RBI set a yield of 8.1439% on the 91-day T-bill and 8.2692% on the 182-day bill.
“This does not mean that the notified amount of the T-bill auction has gone up. The non-competitive bids is over and above the notified amount and is a cash neutral transaction for the government as it is just a substitution for 14-day intermediate T-bills,” said the official, dou s ing market concerns of an increase in the auction size of T-bills.
The RBI has historically been accepting the entire amount of non-competitive bids which is usually by states and offering them at the weighted average yield.