Rs 45B T Bill Auction 6-in-a-row failure

By Paneetha Ameresekere | Published: 2:00 AM Apr 13 2021

By Paneetha Ameresekere

Yesterday’s weekly riskless low value Treasury (T) Bill primary auction for the sale of Rs 45 billion Treasuries as forecast by Ceylon FT yesterday was a 6-in-a-row failure led by the ‘long term’ 364-day and the ‘medium term’ 182-day maturities, where only 1.02 per cent (Rs 225 million) and 70.67 per cent 

(Rs 10,600 million) of the original parcels up for sale were allowed  to be bought by the market (licensed commercial banks (LCBs) and primary dealers (PDs)) due to higher yields asked because of a combination of inflationary pressure and persistent uncertainty.

CBSL/GoSL wants to maintain a low interest rate regime to spur growth.

Consequently only 78.82 per cent (Rs 35,468 million) of the total Rs 45,000 million parcel originally on offer was sold, led once more by the 91-day maturity where 308.04 per cent (Rs 24,643 million) compared to the original parcel (Rs 8,000 million) was sold to the market at a weighted average yield (WAY) of  5.09 per cent, up one basis point (bp) week on week  (WoW) to yesterday, leading  to a situation where GoSL through CBSL borrows ‘short’ to repay maturing ‘long term’ (182 and 364-day) debt  CBSL is the steward of GoSL debt. 

Failure in treasury auctions lead to a splurge of demand-pull inflationary money printing to meet GoSL’s monetary commitments due to a lack of revenue.

Meanwhile, the WAY fetched by the 364-day tenure yesterday was 5.15 per cent, superimposing with the maximum administered yield (MAY) fixed for this tenure at the auction. The WAY fetched for the 182-day tenure at yesterday’s auction was 5.12 per cent, unchanged, WoW. The 91 and 182-day tenures are not governed by MAYs.  Investments in T Bills and T Bonds are riskless, because, in the event GoSL is unable to repay such debt, CBSL is mandated to print demand pull inflationary money and repay such creditors. Money printing exclusive rights are with CBSL.

By Paneetha Ameresekere | Published: 2:00 AM Apr 13 2021

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