CBSL sells Only 36% of Treasuries to Contain Yield Pressure

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Central Bank of Sri Lanka (CBSL) in a bid to contain yield pressure amidst inflation running at a record over 40 per cent, sold only 36.32 per cent (Rs 33,779 million) of the original Treasury (T) Bill issue (Rs 93,000 million) at yesterday’s weekly Treasury (T) Bill auction.

Consequently the weighted average yields (WAYs) of the 91, 182 and 364 day maturities remained unchanged at 20.73, 21.90 and 22.04 per cent, week on week to yesterday.

Subsequently CBSL sold only 49.71 per cent (Rs 19,883 million) of the original 91 day maturity (Rs 40,000 million); 23.04 per cent (Rs 5,759 million) of the original 182 day maturity (Rs 25,000 million) and 18.35 per cent (Rs 5,137 million) of the original 364 day maturity  (Rs 28,000 million), respectively, on offer at yesterday’s auction.

CBSL on behalf of the Government of Sri Lanka (GoSL), being the steward of its debt,  will have to repay Rs 64,665 million worth of maturing T Bills to the market by Friday (24 June), CBSL data also showed.

Their splits comprise 91 day maturities (Rs 54,832 million), 182 day maturities (Rs 9,748 million) and 364 day maturities (Rs 64,665 million), respectively. The values of maturing T Bills held by CBSL and which are also repayable by Friday are however unknown as CBSL doesn’t make privy such data, statistics further showed.

Generally, CBSL repays such debt,  by “once more” borrowing from the market, via by calling for fresh, weekly T Bill auctions, where such calls are normally made on Fridays, for auctions to be held on the coming Wednesdays. CBSL advertises for such auction calls on its website on Fridays.

Issuing of T Bills and T Bonds is a popular method resorted to, by the GoSL to raise money domestically to meet its monetary commitments. Investments 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 and mandated prerogative of CBSL.

By Paneetha Ameresekere