Treasury bills
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Treasury bills are short-term government debt instruments used to finance budgetary gaps. They come in 91, 182, and 364-day maturities and are highly liquid. Ordinary treasury bills are issued publicly while ad-hoc bills are privately placed with the central bank. At a recent auction in India, 91-day bills were cut-off at 11.0031% yield and 364-day bills at 10.4649% yield. Based on historical trends, India's treasury bill yields are expected to remain between 8.5-9% going forward.
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Treasury bills
- 1. TREASURY BILLS By, Chandan Chaurasia Sachin Ganguli Avishek Das
- 2. DEFINITION Treasury bills are short-term instruments issued by the reserve bank on behalf of the government to tide over short-term liquidity shortfalls. This instrument is used by the government to raise short term funds to bridge seasonal or temporary gaps between its receipts and expenditures.
- 3. FEATURES OF T-BILLS • They are negotiable securities. • They are highly liquid as they are of shorter tenure and there is a possibility of inter bank repos in them. • There are 91-day, 182-day & 364-day T-Bills in vogue. • Treasury bills are available for a minimum amount of Rs 25,000 and in multiples thereof. • They have an assured yield, low transaction cost and are eligible for inclusion in the securities for SLR purposes.
- 4. TYPES OF T-BILLS Ordinary or Regular Bills • They are issued to the public and other financial institutions for meeting the short-term financial requirements of the central Govt. • These bills are freely marketable and they can be bought and sold at any time and they have secondary market also. Ad-hoc Bills • Ad hocs are always issued in favour of the RBI only. RBI purcahase Ad hocs and is authorized to issue currency notes against them. • They also provide an investment medium for investing the temporary surpluses of state govt., semi-govt. And foreign central banks.
- 5. CURRENT RATES IN INDIA • The Reserve Bank of India (RBI) accepted majority bids for the treasury bills (T-Bills) auction at exorbitant rates. The auction was worth Rs 12,000 crore, which included 91-day T- bills worth Rs 7,000 crore and 364-day T-bills worth Rs 5,000 crore. The cut-off yields were 11.0031 % for 91-day T-bills and 10.4649 % for 364-day T-bills.
- 6. INDIA TREASURY BILL YIELD 7.48 11.26 12.02 9.57 8.6 8.94 8.73 8.9 9.15 8.94 8.86 8.65 0 2 4 6 8 10 12 14 13-Jul 13-Aug 13-Sep 13-Oct 13-Nov 13-Dec 14-Jan 14-Feb 14-Mar 14-Apr 14-May 14-Jun Source: www.tradingeconomics.com | reserve bank of india
- 7. EXPECTED FUTURE TREND The expected future trend of treasury bill yield rate in India shall be between 8.5% - 9% as per the trend i.e. from Oct-13 till june-14.
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