Govt. renewing treasury bills worth Rs 20 billion to raise internal loans

KATHMANDU, MAY 5: The government is set to renew treasury bills worth Rs 20 billion today to raise internal debt. The Public Debt Management Office has invited bids for the renewal of treasury bills totalling Rs 20.08 billion.

According to the Office, it will renew Rs 5 billion worth of 28-day treasury bills today. Similarly, it will auction Rs 9 billion worth of 182-day bills and Rs 6.08 billion worth of 364-day bills. Interested bidders can participate online from 10 a.m. to 3 p.m. TODAY. The bills will be issued tomorrow.

In recent months, banks have been holding excess liquidity, resulting in bids for treasury bills significantly exceeding the demand. This surplus demand has led to a decline in discount rates. For instance, in the auction held on April 28, Rs 27.04 billion in bids were received for 91-day bills worth Rs 13.10 billion, with the average discount rate fixed at 2.95%.

Likewise, 182-day bills worth Rs 13 billion attracted bids totalling Rs 34.15 billion, with an average discount rate of 2.98%. For 364-day bills worth Rs 2 billion, bids reached Rs 18.40 billion, with the average discount rate at 3%.

In the auction on April 21, 28-day bills worth Rs 10 billion drew bids of Rs 21.59 billion, yielding an average discount rate of 2.97%. Similarly, Rs 5.25 billion worth of 91-day bills saw bids totalling Rs 18.53 billion, with an average discount rate of 2.96%.

The same day, 182-day bills worth Rs 6 billion attracted bids worth Rs 18.55 billion at an average discount rate of 2.98%. For 364-day bills worth Rs 4 billion, bids reached Rs 20.25 billion, with the average discount rate standing at 3.03%.

Competition among banks for treasury bills has intensified lately. Due to abundant liquidity in the financial system and limited alternative investment opportunities, banks have increasingly turned to short-term instruments, even at lower interest rates. As a result, demand for treasury bills continues to exceed supply, keeping interest rates low. Seizing this opportunity, the government has also accelerated its domestic borrowing efforts.

What is a Treasury Bill?

A treasury bill is a short-term government debt instrument issued to raise internal debt for a period of up to one year. Treasury bills are available in four types based on tenure: 28-day, 91-day, 182-day, and 364-day. They are issued through an auction process, which follows a multi-price (American-style) bidding method.

Bidders can submit multiple bids at different prices. The auction is conducted online through an electronic bidding platform. Instead of paying interest, treasury bills are sold at a discount, and the discount rate is determined through the bidding process.

Commercial banks (Class A), development banks (Class B), finance companies (Class C), non-bank financial institutions, institutional investors, and general Nepali citizens can participate in treasury bill auctions. At least 15% of the total issue amount is reserved for non-competitive bidders.

However, Class A, B, and C banks and financial institutions are not allowed to participate as non-competitive bidders. In non-competitive bidding, only the desired investment amount is submitted, not the price. These bids are awarded at the weighted average price determined through the competitive auction. A single entity is not permitted to submit both competitive and non-competitive bids in the same auction.