Spike...

I am thinkin' of an answer for short term yield spike, which can be terribly wrong...(plz correct me if i am wrong) -->

Monetary Tightening Measures (as mentioned in the article) --> Race to raise money in the debt market --> Secondary Market for debt has securities of all tenor, out of which shorter tenor papers are more attractive right now as yield curve is close to flat (investors would like to get the same yield as early as possible - a typical debt market phenomenon when the yield curve is flat!) --> Sale of such papers by PDs in the market to raise cash --> increase in volume of short term papers --> Fall in Prices --> Increase in Yields (a Spike in the Yield curve (near the short term area!)

(As mentioned in class, there can be many more signaling reasons. All T-Bill auctions in August closed at high yields!!)

SANAT SATYAN