T-bill, money market rates rise on VRRR plan

ET BureauLast Updated: Jun 26, 2025, 06:04:00 AM IST

Synopsis

Treasury bill and money market rates experienced an increase following the RBI's announcement of a variable rate reverse repo operation. The weighted average call rate and treps rate also saw a rise. Experts suggest that the RBI's move aims to manage surplus system liquidity and align rates within the liquidity adjustment facility corridor.

Mumbai: Treasury bill and money market rates rose as much as seven basis points on Wednesday, after the RBI announced a variable rate reverse repo (VRRR) operation on Tuesday. The weighted average call rate rose 3 bps to 5.30%, while treps rate rose five bps to 5.25%.

The T-bill auction saw yields harden by 5-7 bps across 3 tenures, after being on a softening trajectory for over 4 months. Restarting of VRRR operations by RBI suggests that the central bank would keep surplus system liquidity in check, and align the call and treps rates near the repo rate and within the liquidity adjustment facility (LAF) corridor, experts said. The LAF corridor is between 5.25% and 5.75%.

"Now that advance tax and GST outflows are behind us and as we approach month-end, RBI would expect government spending to pick up. These operations will take care of frictional liquidity flows," said Sakshi Gupta, principal economist at HDFC Bank.

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