Inflation, uncertainty, get the better

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The twin evils of record high inflation and uncertainty got the better of the weekly Treasury T Bill primary auction after a lapse of three consecutive weeks, on Tuesday (9), resulting in Central Bank of Sri Lanka (CBSL) selling a mere 6.58 and 15.70 per cent (Rs 1,646 million and Rs 3,924 million) of the original 182 and the benchmark 364-day maturities in a bid to rein in yields.

In the previous three weekly auctions prior to Tuesday, the weighted average yields (WAYs) of all three tenures offered at this auction, namely the 91, 182 and 364- day maturities fell sharply, week on week (WoW). Consequently, the WAYs of the 182 and 364 day maturities saw the former remain unchanged at 28.97 per cent, while that of the latter saw a parsimonious fall of four basis points (bps) WoW to 29.15 per cent on Tuesday.

However, the WAY of the 91-day maturity rose sharply by 71 bps WoW to 28.43 per cent on Tuesday. CBSL sold 172.35 per cent (Rs 60,329 million) of the 91-day maturity compared to its original offer of Rs 35,000 million made at this auction on Tuesday, to rein in yield pressure, across the board. Meanwhile, the original parcels of the 182 and 364-day maturities offered at Tuesday’s auction were Rs 25,000 million each, respectively.

Subsequently, across the board, CBSL sold only 77.53 per cent (Rs 65,899 million) of the total parcel offered, compared to its original offer of Rs 85,000 million made to the market on Tuesday.

CBSL on behalf of the Government of Sri Lanka (GoSL) had to repay maturing T Bills worth Rs 66,227 million to the market, on Friday (12). Settlement of Tuesday’s auction too was on that day.

By Paneetha Ameresekere