Selling Pressure on Treasuries

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 Government of Sri Lanka’s (GoSL’s) at least theoretical money printing borrowing costs (MPBCs), accelerated by 3.99 per cent (Rs 5,013.75 million) to Rs 130,777.28 million on Friday (12 August) led by selling pressure of Treasury (T) Bills and T Bonds in secondary market trading by investors, to reinvest in tomorrow’s (Wednesday 17 August) Rs 60 billion T Bill auctions on expectations of higher yields due to runaway inflation.

 Increase in GoSL’s face value (FV) MP debt, relative to the acceleration of its MPBCs,  decelerated  by 0.77 per cent
(Rs 24,214.91 million) to Rs 3,164,057.17 million (Rs 3.1641 trillion) on Friday. This increase was however non-demand pull inflationary as it was led by the settlement of transactions between GoSL and Central Bank of Sri Lanka (CBSL).  GoSL’s FVMP debt has been over Rs three trillion for a record consecutive 26 market days to Friday due to a perennial lack of revenue.

Liquidity was enhanced for the second consecutive day to Friday, with Friday’s increase being by Rs 36,919.91 million (US$ 102.29 million), led by the settlement of transactions between GoSL and CBSL. Conversions are based on the administered value of the benchmark “spot” which was Rs 360.94 to the dollar on Tuesday.

Market was short for a record 228 market days to Friday,  with this shortfall increasing by 2.16 per cent (Rs 12,705 million) to 601,878 million,  virtually causing perpetual rate pressure. GoSL’s highest to the 231st highest FVMP debt has been registered for a record 231 market days to Friday.

By Paneetha  Ameresekere