The Reserve Bank of India (RBI) has announced the weekly auction of its treasury bills. The tentative T-bills yields for three months, six months and 364 days were set at 6.40%, 6.51%, and 6.54%, respectively. This means, you can earn up to ₹6,500 on ₹1 lakh investment in a T-bill as per the fixed timeline. However, the income could be more if invested a higher amount. RBI’s Liquidity Moves RBI is ramping up liquidity infusion efforts as the banking system faces a persistent deficit exceeding ₹1.5 trillion. Besides regular Variable Rate Repo (VRR) auctions and Open Market Operation (OMO) purchases, the RBI made an unexpected move last Wednesday by rejecting all bids for 91-day and 182-day Treasury Bills, retaining ₹26,000 crore in the system to ease liquidity strain, said Venkatakrishnan Srinivasan, founder of Rockfort Fincap LLP. RBI has also announced a $10 billion USD/INR Buy/Sell Swap auction with a three-year tenour. Under this arrangement, banks will sell USD to the RBI upfront and repurchase it at maturity, adding rupee liquidity. This measure is particularly critical in March, when seasonal tightening occurs due to advance tax and GST outflows, Srinivasan said. State Development Loan (SDL) auctions SDL auctions continue to fall short of the notified amounts in the indicative auction calendar. For the upcoming week, states have cumulatively offered to raise ₹38,054 crore via SDL auctions, significantly lower than the ₹49,907 crore indicated earlier. Despite the liquidity measures, the recent 25 bps repo rate cut and ongoing OMO purchases, the benchmark 10-year G-sec yield remains sticky around 6.70%, which is slightly higher. Why do bond (G-secs) yields fluctuate? Bond yields (G-secs) fluctuate based on supply and demand. If the government issues a single G-sec and multiple buyers compete, the bond’s price may rise. Since the coupon payment remains fixed, a higher price lowers the yield. Corporate Bond Market Dynamics The AAA-rated corporate bond yield curve remains inverted, showing strong near-term demand: • 1-year: 7.70% • 3-year: 7.50% • 5-year: 7.35% • 10-year: 7.28% “Credit spreads over corresponding G-Secs are widening, as institutional investors increasingly seek to lock in long-term yields. The interplay of demand-supply dynamics is further shaping the yield curve,” Srinivasan said. Primary market activity Recent primary market issuances featured major deals from Power Finance Corporation, Cube Highways, Tata Steel, Vedanta, and Bank of Maharashtra. Upcoming bond offerings from REC, Bajaj Finance, IREDA, and GMR Airport are anticipated, as these issuers have announced fundraising plans to stock exchanges. Bonds offering new opportunities for investors Suresh Darak, Founder, Bondbazaar, said, “The bond market is witnessing dynamic movements, with investment-grade bonds offering attractive fixed returns, and fresh issuances, such as Prachay Cap's IPO, bringing new opportunities for investors. “While blue-chip corporates like Tata Steel and Tata Capital are tapping the debt markets for large fundraises, challenges faced by players like Kinara Capital highlight the importance of credit quality and due diligence. “With foreign investors pulling out and G-Sec yields holding steady, investors should assess their options carefully. This could be the calm before the storm—locking in investments now could be a strategic move before market shifts occur.” “With the investor preference is tilting toward longer-duration bonds to capitalize on potential capital gains, tight liquidity conditions and slow transmission of rate cuts into the banking system may continue to keep short-term yields elevated for now,” Srinivasan adds.