Government T-bill rates today stayed above the State Bank's policy rate of 11.5 per cent, after the government kept treasury bill returns almost unchanged at a Wednesday auction. The auction raised Rs685.5 billion in total, and the six-month bill, the market benchmark, yielded 12.39 per cent. That is 89 basis points above the policy rate, where one basis point is one-hundredth of a percentage point.
What the latest auction showed
The government raised Rs417.6 billion through competitive bids and another Rs267.9 billion through non-competitive bids, where buyers accept the rate set at the auction instead of naming their own. Returns on every tenor, meaning every maturity period, stayed higher than the policy rate. Investors' bids came to Rs2.6 trillion, down from Rs2.7 trillion at the auction held on Oct 1.
The six-month bill's yield fell 6 basis points to 12.39 per cent from 12.45 per cent at the Oct 1 auction. That earlier auction recorded the largest single increase of 75 basis points, when the yield rose from 11.70 per cent at the Sept 16 auction. The available figures do not fully reconcile on the wider gap: 12.45 per cent is 95 basis points above the 11.5 per cent policy rate, while the figures cited for the previous auction put the gap at 99 basis points. Readers should treat the spread as approximate.
Why banks are parking money in government paper
Most investors at the auction were banks, which wanted to park surplus cash in government securities because lending options at home look extremely limited. Financial experts said investors were wary of taking risks amid the Gulf war and political uncertainty in the country. Domestic investors have been hoping for about three years that government steps would revive the economy.
The International Monetary Fund (IMF) had forecast 3.5 per cent growth for FY27, the fiscal year the forecast covers, but the finance minister said on Tuesday he hoped for 4 per cent. Private sector borrowing has also been slow, with the first quarter ending without fresh private borrowing. Private borrowing was Rs1.4 trillion in FY26 and Rs1 trillion in FY25, and bankers said most of it went to working capital, meaning short-term funding rather than long-term investment.
Timeline: what has happened so far
- Sept 16: The six-month T-bill yield stood at 11.70 per cent at that auction.
- Oct 1: The six-month yield rose 75 basis points to 12.45 per cent, and investor bids reached Rs2.7 trillion.
- Wednesday auction (the exact date is not stated in the available material): The government raised Rs685.5 billion, the six-month yield eased to 12.39 per cent, and bids came to Rs2.6 trillion.
- Oct 26: The next monetary policy announcement is scheduled, when the State Bank is due to set its policy rate again.
Aasan alfaaz mein
Sarkar ne T-bill par mili returns ko State Bank ke policy rate 11.5 fisad se oopar rakha hai. Banks aur bade investors is waqt sarkari paper mein paisa rakhna pasand kar rahe hain, kyunke ghar mein lending ke mauqe kam hain. Aam aadmi ke liye ye ishara hai ke interest rates abhi bhi unche hain, aur 26 October ko aane wala policy faisla ahem hoga.
