Uncertainty Aids WAYs Fall

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Weighted average yields (WAYs) at yesterday’s weekly Treasury (T) Bill auction fell across the board for the second consecutive week, aided by a guided auction, coupled with sustained uncertainty, where, investors continued to prefer to invest in riskless, but “low” returns T Bills, rather than the lucrative private sector because of perennial uncertainty.

Subsequently, at  yesterday’s auction, the WAYs of the 91, 182 and the benchmark 364-day maturities declined by 264, 63 and  29 basis points (bps) each to 28.86, 29.24 and 29.53 per cent respectively, week on week.

The sales splits at yesterday’s auction comprised 161.16 per cent (Rs 60,434 million) of the 91-day maturity compared to its original offer of Rs 37,500 million made to the market; 40.76 per cent (Rs 10,190 million) of the 182-day maturity compared to its original offer of Rs 25,000 million and 63.89 per cent (Rs 14,376 million) of the 364-day maturity compared to its original offer of Rs 22,500 million, respectively. Subsequently, Central Bank of Sri Lanka (CBSL) the steward of Government of Sri Lanka (GoSL) debt sold the total parcel of Rs 85 billion offered across the board at yesterday’s auction.

CBSL on behalf of the GoSL will have to repay maturing T Bills totalling Rs 81,832 million to the market by tomorrow, CBSL data showed.

Their splits are 91-day maturities (Rs 78,752 million); 182-day maturities (Rs 1,430 million) and 364 day maturities (Rs 1,650 million) respectively. However, maturing T Bills held by CBSL and repayable to it by Friday is unknown as CBSL doesn’t make privy such information.

Generally, CBSL repays such debt by once more borrowing from the market by reissuing T Bills to the same. Such weekly issuances/reissuances are normally made on Wednesdays with announcement of such issuances/reissuances made on CBSL’s website on the preceding Friday.

Issuing of T Bills and T Bonds is a popular way that GoSL raises money domestically to meet its monetary needs. 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. CBSL is the steward of GoSL debt and its foreign reserves.

Paneetha Ameresekere