Interest Rate Futures on 91-Day Treasury Bills - Methodology for computing the weighted average discount yield

The amendment directions, issued by the Reserve Bank of India (RBI) on March 07, 2011, permitting trading of Interest Rate Futures (IRFs) on 91-Day Treasury Bills specifies that the final settlement price of the futures contract shall be based on the weighted average price/yield obtained in the weekly auction of the 91-Day Treasury Bills on the date of expiry of the contract.

In this regard, it was decided by the RBI-SEBI Standing Technical Committee on Currency and Interest Rate Futures that the methodology of computation and dissemination of the weighted average discount yield would be publicly disclosed by RBI.

Accordingly, for the purpose of final settlement of 91-Day T-Bill Futures, SEBI recognized stock exchanges may use the weighted average price obtained from the weekly auction of 91-day Treasury Bills on the day of expiry of the contract (notified by the RBI in its press release announcing the auction results of the day) for arriving at the weighted average discount yield. The formula for arriving at the weighted average discount yield shall be as follows:

WAY = weighted average discount yield;

WAP = weighted average price obtained from the weekly auction of 91-day Treasury Bills on the day of expiry of the contract (notified by the RBI in its press release announcing the auction results of the day)

Ajit Prasad
Assistant General Manager

Press Release : 2010-2011/ 1334