WAYs rise led by renewed uncertainty

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Treasury (T) Bill weighted average yields (WAYs) at Wednesday’s (11) weekly T Bill auction rose sharply across the board led by renewed political uncertainty and backed by over 20 per cent inflation.

Consequently the WAY of the 91-day tenure increased by 59 basis points (bps) week on week (WoW) to  a new record of 24.07 per cent at Wednesday. The previous record for the 91-day tenure was 23.53 per cent established at the weekly T Bill auction of 27 April 2022.

Meanwhile, the 182 and benchmark 364-day maturities saw their WAYs increase by 74 and 58 bps each, WoW to 24.69 and 24.50 per cent respectively at Wednesday’s auction. A distortion at Wednesday’s auction is that the WAY of the 182-day tenure is greater than that of the 364-day tenure.

In related developments, the WAY of 24.69 per cent fetched by the 182-day tenure on Wednesday is its second highest, with the highest being 24.77 per cent, established at the 20 April auction. However, the 24.50 per cent fetched for the 364-day on Wednesday is its highest, where it’s previous highest was 24.36 per cent, established at the 20 April auction.

In like developments, Central Bank of Sri Lanka (CBSL) sold 141.99 per cent (Rs 66,027 million) of the 91-day maturity compared to its original offer of Rs 46,500 million at Wednesday’s auction. CBSL accepting an abnormally high amount of the 91-day maturity compared to its original offer at Wednesday’s auction in a bid to keep a lid on yields has been a phenomenon that has been taking place since the weekly T Bill auction of 10 February 2021 save four.

Meanwhile, CBSL sold only 18.37 per cent (Rs 4,225 million) and 65.86 per cent (Rs 15,147 million) of the 182 and 364-day maturities compared to their original offers of Rs 23,000 million each in order to artificially compress yields at  Wednesday’s auction. CBSL accepting Spartan amounts of 182 and 364-day maturities to artificially keep yields low is a continuation of a practice begun by it since the weekly T Bill auction of 26 January 2021.  However, CBSL sold only Rs 85,399 million (92.32 per cent) worth of the total value of T Bills of Rs 92,500 million offered at Wednesday’s auction.

By Paneetha Ameresekere