91-day t-bills, Financial Management

91-Day T-Bills

Starting from July, 1965, 91-day T-bills were issued at a discount rate ranging from 2.5-4.6 percent per annum. Till July, 1974, the discount rate was 4.6 percent. Even later, the discount rate hovered around the same. The extremely low yield on these bills was totally out of alignment with the other interest rates in the system. Moreover, the Central Bank readily rediscounted these bills due to which the yield for these bills remained more or less artificial. The banks used these instruments to park their funds for a very short period of 1-2 days. This resulted in violent fluctuations of volumes of outstanding T-bills. The RBI had introduced two measures in order to cope with the situation. Firstly, to recycle the T-bills (from October, 1986) under which the bills are rediscounted by the RBI and are resold to the banks. Secondly, an additional early rediscounting fee was imposed, if the banks rediscounted the T-bills within 14 days of purchase. Although this resulted in a decline in weekly fluctuations, the T-bills market did not become an integral part of the money market and the interest rates did not rise considerably as the bulk of T-bills continued to be held by the RBI. The weekly auctions of 91-day T-bills were started in January 1993, which in due course resulted in gradual decline of the T-bills outstanding with the RBI.

 

Posted Date: 9/11/2012 4:09:02 AM | Location : United States







Related Discussions:- 91-day t-bills, Assignment Help, Ask Question on 91-day t-bills, Get Answer, Expert's Help, 91-day t-bills Discussions

Write discussion on 91-day t-bills
Your posts are moderated
Related Questions
Q. Relative costs and benefits? Option 1- Factoring Reduction in receivables days = 15 days Reduction in receivables =15/365* £20m = £821916 Option 2 - The

Max Z = 107x1+x2+2x3 Subject to 14x1+x2-6x3+3x4=7 16x1+x2-6x3 3x1-x2-x3 x1,x2,x3,x4 >=0

The following treasury issues can be included for the construction of the curve: On-the-run treasury issues. On-the-run treasury issues and sele

Market price is used for determining the duration of a mortgage-backed security in the coupon curve duration. This approach to calculate the duration of mortgage-bac

The Nu-Nu Brothers Inc. (NNBI) has the following capital structure, which it considers to be optional: Debt 25% Preferred Stock 15% Common Equity 60% NNBI''''s expected net income

I just purchased a stock that would pay the dividends of the first four years as D1 = $0.65, D2 = $0.74, D3 = $0.79, D4 = $0.84. I also told that the dividends would grow continual

The purpose of this financial analysis is to determine the economic viability during the last five years of the Lance Company and to advise our client on whether the acquisition of


Why do analysts calculate financial ratios? The comparative measures are known as Ratios. Since the ratios show relative value, they permit financial analysts to compare inform

Define how earnings available to common stockholders and common stock dividends paid from the current income statement influence the balance sheet item retained earnings. The a