CBSL caps yield pressure by accepting only 10% of offers

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Central Bank of Sri Lanka (CBSL) yesterday capped yield pressure at the weekly Rs 75,000 million Treasury (T) Bill auction by accepting only 9.65 per cent (Rs 10,270 million) from the total offers of Rs 106,432 million made.

Consequently, yield pressure, driven by record high inflation, nonetheless stagnated at its record high levels of 32.89, 31.28 and 30.50 per cent each in respect of the 91,182 and the benchmark 364 day maturities at yesterday’s auction, week on week. The fact that the weighted average yield of the 91 day maturity continued to be higher than that of the longer maturities is an indication that yield pressure is in the short term.

CBSL, the steward of Government of Sri Lanka (GoSL) debt, sold the Rs 10,270 million finally accepted in splits of Rs 5,767 million (19.22 per cent) for the 91-day maturity compared to its original offering of Rs 30,000 million, 182-day, 7.61 per cent (Rs 1,902 million) vis-à-vis its original offer of Rs 25,000 million and the 364 day, 13.01 per cent (Rs 2,601 million) from a total of Rs 20,000 million originally offered for this parcel.

Meanwhile, CBSL, on behalf of GoSL, will have to repay to the market by tomorrow, Rs 56,857 million worth T-Bill maturities. Settlement date of yesterday’s T-Bill auction too is tomorrow. However, repayments due to CBSL due to such maturities held by it are unknown as CBSL doesn’t make privy such information.

The splits of T-Bill maturities due for repayment to the market by tomorrow are 91-day maturities Rs 55,642 million, 182-day maturities Rs 300 million and  364-day maturities Rs 915 million, respectively. 

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.

By Paneetha Ameresekere