RBI rejects all bids at ₹23,000 crore treasury bill auction as oil exceeds $110
GS3Economy · S&T · Environment · Security· Monetary policy, RBI & banking· Prelims·
Monetary policy and debt market dynamics: a GS3 case study on commodity price impacts.
Why in news
The Reserve Bank of India (RBI) rejected all bids at a ₹23,000 crore treasury bill auction due to elevated yield bids driven by oil prices exceeding $110 per barrel.
Background
The RBI cancelled an auction intended to raise ₹23,000 crores through 91-day, 182-day, and 364-day treasury bills. Market analysts, including RBL Bank's head of treasury, suggested the action signals a potential 50 basis point interest rate hike in December.
Facts for Prelims
- FactRBI rejected bids for a ₹23,000 crore treasury bill auction on Wednesday.
- FactTreasury bills in the auction were for durations of 91-day, 182-day, and 364-day.
- FactBrent crude oil prices exceeded $110 per barrel, reaching nearly $112 on Tuesday.
- FactBanks bid at yields at least 15 basis points higher than the previous week's auction.
Prelims practice question
Which of the following durations were included in the cancelled treasury bill auction?
- (a)7-day, 14-day, and 21-day
- (b)91-day, 182-day, and 364-day
- (c)30-day, 60-day, and 90-day
- (d)180-day, 360-day, and 540-day
Show answer
Answer: (b) 91-day, 182-day, and 364-day — The note specifies that the auction was intended to raise funds through 91-day, 182-day, and 364-day treasury bills.
For Mains
Q. Analyze how fluctuations in global commodity prices, specifically crude oil, influence the RBI's monetary policy decisions and the domestic debt market.
Dimensions to cover in your answer
- Inflationary pressure: High oil prices as a net importer increase headline inflation and necessitate hawkish monetary stance.
- Yield curve dynamics: Elevated short-term yields impacting government borrowing costs and private sector credit availability.
- External vulnerability: Correlation between global yield pressure, FII selling, and domestic bond yields.
Keywords: Monetary Policy · Treasury Bills · Yield Curve · Inflation Targeting · Fiscal Deficit · Commodity Volatility
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