WAY of 91-day maturity rises to 13-year high

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By Paneetha  Ameresekere

The weighted average yield (WAY) of the 91 day maturity zoomed to a 13 year high, last witnessed during the war days,  at yesterday’s weekly Rs 48,000 million Treasury (T) Bill auction due to a combination of sustained uncertainty and an over 20 per cent inflation.

Consequently the WAY of the 91 day maturity increased by 82 basis points (bps) week-on-week (WoW) to 12.92 per cent at yesterday’s auction, where a WAY higher than this for this maturity was last seen in March 2009.

A distortion in the market is that the WAY of the 91 day maturity for the third consecutive week to yesterday was higher than the WAYs fetched for the 182 and 364 day maturity, which rose at a sluggardly 27 and 28 bps each, WoW  to 12.25 and 12.28 per cent, WoW to yesterday, in a vain bid by Central Bank of Sri Lanka (CBSL) to curb yield pressure by selling infinitesimal  amounts of the longer tenures and an abnormally large amount of the 91 day tenure, a practice that it has indulged in, since the T Bill auction of 10 February 2021.

CBSL, the steward of GoSL debt, sold 264.73 per cent (Rs 47,652 million) of the 91 day maturity compared to its original offer of Rs 18,000 million, the ultimate sale of which was also equivalent to 99.28 per cent of the original total offer.

Meanwhile, only 0.04 (Rs five million) and 1.91 per cent (Rs 343 million) of the original offers of the 182 and 364 day maturities of Rs 12,000 million and Rs 18,000 million were ultimately sold to the market at yesterday’s auction.

Higher WAYs than this for the 182 and 364 day maturities were last seen at the 26 September 2012 and at the 12 December 2012 auctions, where the WAYs fetched were 12.57 and 12.45 per cent, respectively. That was a period when the rupee was refloated after being repressed for months, with the first shot of ending this repression being fired in ‘Budget 2012’ presented in November 2011 where the rupee was devalued by three per cent, followed by its free float in February 2012.

Meanwhile, the benchmark ‘spot’ closed Tuesday at Rs 315/325 to the US dollar in two way quotes, down Rs 7-17 in two way quotes and year-on-year by 57.50-61.69 per cent (Rs 115-124) in two way quotes, thereby causing cost-push inflationary pressure as Sri Lanka is an import dependent economy. A year ago the market exchange rate closed at Rs 200/201 to the dollar in two way quotes in one week’s forwards.