The weighted average yield (WAY) of the 2031 maturity rose sharply by 561 basis points (bps) or by 5.61 percentage points to 29.52 per cent at Tuesday’s (30 August) Treasury T Bond auction driven by record high inflation registered at 66.7 per cent last month.
Prior to Tuesday, the last time Central Bank of Sri Lanka (CBSL) offered the 2031 maturity to the market was a month ago on 28 July. CBSL sold the total parcel of Rs 25,000 million offered at Tuesday’s auction.
However, vis-à-vis the other parcel on offer at Tuesday’s auction, namely the 2025 maturity, only 16.29 per cent (Rs 2,443 million) was sold to the market compared to its original offer Rs 15,000 million, in CBSL’s bid to contain yield pressure. The WAY fetched for the 2025 maturity at this auction was 29.16 per cent, up 71 bps compared to the WAY of 28.45 per cent fetched at the 28 July auction.
Meanwhile, at the 10 August auction, the interim T Bond auction held between Tuesday and the 28 July auction, where the 2025 maturity was then too offered to the market, however, CBSL, at the 10 August auction, rejected all offers made for the 2025 maturity because of higher WAYs asked for by the market. The 2031 maturity was not offered at the 10 August auction.
CBSL is the steward of Government of Sri Lanka (GoSL) debt. Issuing of T Bonds and T Bills to the market is a popular way that GoSL raises rupees from the domestic market. Investing in T Bonds and T Bills are risk free, because in the event that GoSL is unable to honour such debt, CBSL is mandated to print demand pull inflationary money and repay such creditors.
BY Paneetha Ameresekere