CBSL stops specifying T-Bonds MAYs after 16 months
By Paneetha Ameresekere
Central Bank of Sri Lanka (CBSL) for the first time after 16 months has stopped issuing maximum administered yields (MAYs) in respect of the Rs 20,000 million Treasury (T) Bonds auction due on Tuesday (28 September), thereby giving the market a limited amount of flexibility to determine such yields. Government of Sri Lanka (GoSL) and CBSL want to artificially suppress rate pressure despite rising inflation to keep GoSL’s borrowing costs down and also to spur growth.
The T-Bonds on offer at Tuesday’s auction are Rs 10,000 million, each of 2023 and 2030 maturities respectively. CBSL lifting MAYs of T-Bonds for Tuesday’s auction follows CBSL first removing MAYS of T-Bills after 75 weeks beginning with last Wednesday’s (22 September) weekly T-Bills auction for the issue of Rs 39,500 million T-Bills. At the time of writing CBSL hasn’t specified the T-Bills issue due for this week.
Administered rates despite inflation causes an aversion by the market to invest in T-Bills and T-Bonds thereby leading to money printing, of which a sizeable chunk is demand pull inflationary. Money printing at Rs 1.6016 trillion as at last Thursday (23 September) is a record high figure.