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Informist, Wednesday, Oct. 21, 2026

--RBI rejects all bids for 91-, 182-, 364-day T-bill auctions 

--RBI rejects all bids at T-bill auction for first time since Mar. 25

NEW DELHI – The Reserve Bank of India Wednesday rejected all bids at the INR-230-billion Treasury bill auction for the first time since Mar. 25. While this was the first rejection of the 91-day T-bill in nearly seven months, the bids for the 182-day and 364-day papers were last rejected on Jun. 3. 

An Informist Poll of 11 bond dealers had pegged the cut-off at 5.8150% for the 91-day T-bill, 6.3750% for the 182-day T-bill, and 6.5575% for the 364-day T-bill. After the bidding ended at 1130 IST, dealers said the expected cut-off was higher, at 5.85%, 6.45%, and around 6.60%, respectively, for the three tenures on offer.

"The market doesn't know where to bid because of the uncertainty around overnight rates," a dealer at a private-sector bank said. "So even if he (RBI) is trying to send a signal that he is uncomfortable with the yields being sought, the direction is undeniable."

The RBI likely rejected the bids as cut-off yields were higher than the government was comfortable with, dealers said, especially with a healthy cash balance. A back-of-the-envelope calculation from latest RBI data showed the government's cash balance was in excess of INR 5 trillion as of Sept. 30. Cut-off yields on 91-day, 182-day, and 364-day T-bills rose by 21-23 bps in the first two weeks of October alone, as of the last auction on Oct. 14. 

The overnight Mumbai Interbank Outright Rate--the benchmark for the uncollateralised call money market--was set at 5.87% Thursday, 5.86% Friday, 5.70% Monday and 5.67% Wednesday. All the fixings were well above the policy repo rate of 5.50%. Bids at higher yields increased as the auction progressed between 1030 and 1130 IST after data showed banking system liquidity on Tuesday was at its lowest level since Jul. 22, dealers said. The RBI's net liquidity absorbed – a proxy for the systemic liquidity surplus – was INR 483.05 billion Tuesday, the lowest in nearly three months. The highest estimate for the 91-day T-bill cut-off in the Informist Poll was 5.90%.

Mutual funds also had conflicting commitments with the cash, limiting their interest and appetite to invest in the short-term securities. Several institutional investors were vying to secure an allotment in the marquee initial public offering of Jio Infocomm Ltd., which opened Wednesday. With the low liquidity surplus, attractive overnight rates and the opening of the IPO, mutual fund participation fell sharply and may have led to "spotty" bidding at the auction for the three T-bill, dealers said. 

The RBI's rejection of bids did not have much impact on secondary market prices on either gilts or T-bills of comparable maturity, dealers said. "Some bids have come for last week's paper but there's no movement in g-sec (after the auction result)," a dealer at a state-owned bank said. "RBI is definitely trying to show they are not happy with yields and to calm down the market with liquidity." The scheduled redemption of INR 424.27 billion of T-bills will add to banking system liquidity this week, without a corresponding drain since there was no fresh issuance, dealers said.  End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Aaryan Khanna

Edited by Akul Nishant Akhoury

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