T Bond bids rejected after five years

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Central Bank of Sri Lanka (CBSL), for the first time after more than five years, rejected all bids received at a Treasury (T) Bond auction. This happened after it rejected all bids received at yesterday’s Rs 45 billion T Bond auction. The last time such an occurrence took place was when CBSL rejected all bids received for a Rs 16.5 billion T Bond auction held on 16 February 2017. Yesterday’s rejected T Bond split comprised Rs 25 billion 2025 maturities and Rs 20 billion 2029 maturities. Such rejections take place when the market asks for higher yields than that which CBSL is prepared to allow the Government of Sri Lanka (GoSL) to pay. But with inflation at over 20 per cent there is a tendency for the market to ask for higher yields.

Prior to yesterday’s T Bond auction, at the last T Bond auction held, which was on 11 March,  the 2024, 2027 and 2031 maturities offered at that auction fetched weighted average yields of 14.41, 14.73  and 15.42 per cent, respectively. Issuing of T Bonds is a popular instrument that the Government of Sri Lanka (GoSL) resorts to, to raise money from the domestic market to meet its monetary needs. CBSL is the steward of GoSL debt.

(PA)