By IndiaHub 
Shorter-term yields are, however, expected to trend lower going ahead given the comfortable liquidity, steepening the yield curve.
Returns on all three tenures of treasury bills-91-day, 182-day, and 364-day-have largely been the same over the past three auctions, reflecting easy banking system liquidity. Short tenured treasury bills with maturity between 91 days and 364 days are likely to yield around 5.65% in the upcoming auction on Wednesday, nearly six basis points lower than the previous one. These yields are expected to be flat across the three tenures, similar to auctions in the previous weeks.
JPMorgan Chase CEO Jamie Dimon advocates for taxing carried interest, aligning with Donald Trump’s efforts to close the loophole benefiting private market investors. Dimon suggests using the additional revenue to double income tax credits, benefiting communities and families. He also cautioned about a potential “crack in the bond market” due to government overspending and quantitative easing.
“We have over ₹70,000 crore of extra liquidity this week which was not factored in because of some maturity payouts of government bonds, in addition to the dividend. This can likely lead to softer yields of T-bills in upcoming auctions, as short-tenured assets would benefit the most,” said Mataprasad Pandey, vice-president at Arete Capital Services.
Agencies“The extra liquidity can also lead to some cut in borrowings of T-bills like last year,” Pandey said.
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Banking system liquidity jumped from ₹99,123 crore as on May 22, to ₹1.71 lakh crore as of May 23, latest RBI data showed. “Sustained surplus liquidity of 1% of NDTL or higher will likely lead to a rally in the shorter end of fixed income assets. The dividend transfer is expected to boost banking and durable liquidity above ₹6 lakh crore in the near term” said Devang Shah, head of fixed income at Axis Mutual Fund.