T Bill sales fall to 14 month low

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Central Bank of Sri Lanka (CBSL) after nearly 14 months sold the lowest amount of Treasury T Bills, Rs 16,475 million (18.31 per cent), out of a total parcel of Rs 90,000 million on offer at yesterday’s auction in a bid to contain yield pressure with inflation at over 20 per cent.

A figure lower than this was last sold at the weekly T Bill auction of 30 March 2021, where CBSL sold Rs 10,264 million (22.81 per cent) of the total T Bills of Rs 45,000 million offered  at that auction.

Consequently, the weighted average yields (WAYs) of the 91, 182 and 364 day maturities stagnated at 24.07, 24.69 and 24.50 per cent at yesterday’s auction.

The amounts sold comprised Rs 6,416 million (12.83 per cent), Rs 3,433 million (17.17 per cent) and Rs 6,626 million (33.13 per cent) of the original parcels amounting to Rs 50,000 million for the 91 day maturity  and Rs 20,000 million each for the  182 and 364 day maturities respectively, yesterday.

Yesterday’s sale comes in the backdrop that CBSL will have to repay Rs 83,419 million worth of T Bills owed to the market which has to be settled by tomorrow (20 May). Settlement of yesterday’s T Bill auction too is tomorrow.

The splits of  the T Bill maturities which will have to be repaid to the market by tomorrow are 91 day maturities (Rs 77,485 million), 182 day maturities (Rs 5,757 million) and 364 day maturities (Rs 177 million), respectively. T Bill holdings of CBSL which also matures by tomorrow are unknown as CBSL doesn’t make privy such information. 

Investing in T Bills and T Bonds are risk free because in the event Government of Sri Lanka (GoSL) is unable to repay such debt, CBSL is mandated to print demand pull inflationary money and repay such debtors. Issuing of T Bills and T Bonds to the market is a popular way that GoSL raises money domestically to meet its monetary commitments. CBSL is the steward of GoSL debt

Issuing of T Bills and T Bonds is a popular way that GoSL raises money from the domestic market to meet its monetary requirements.  Investing in T Bills and T bonds are risk free because in the event GoSL is unable to honour such debt, CBSL is mandated to print demand pull inflationary money and repay such creditors.  Money printing is the sole prerogative of CBSL.

By Paneetha Ameresekere