Tomorrow’s Rs 85B T-Bill auction, largest ever
By Paneetha Ameresekere
Central Bank of Sri Lanka (CBSL) will hold its largest face value (FV) weekly Treasury (T) Bill auction tomorrow (13), an auction for the issuance of Rs 85,000 million T-Bills (Rs 85 billion), to repay Rs 84,095 million worth of FV T-Bills maturing on Friday (15). Settlement date of tomorrow’s T-Bill auction is also on Friday.
The splits for tomorrow’s auction are the issuances of 91-day maturities comprising Rs 30,000 million, 182- day maturities of Rs 25,000 million and 364-day maturities comprising Rs 30,000 million; respectively. And the splits of T-Bill maturities that will have to be repaid on Friday are 91-day maturities (Rs 47,760 million), 182 day maturities (Rs 10,600 million) and 364-day maturities (Rs 25,735 million) respectively.
Generally, what CBSL has been doing in the weekly T-Bill auctions held since 10 February 2021 is that they allow the 91-day maturity to be oversubscribed by over 100 per cent not only to repay maturing 91-day debt, but also to repay the maturing debt of the other two maturities as well, namely the 182 and 364-day maturities, while allowing the auctions for these two maturities (182 and 364-day maturities) to be either undersubscribed or rejected, to contain rate pressure.
This routine was deviated in only three weekly auctions in the interim, i.e. in the weekly T-Bill auctions held on 24 March 2021, 30 March 2021 and 11 May 2021 respectively, where the 91 day maturities allowed to be subscribed in those auctions were under 100 per cent. Despite high inflation, CBSL and Government of Sri Lanka (GoSL) want to artificially maintain a low interest rate regime for the two fold reasons of keeping GoSL’s debt costs low and also to spur growth.
Issuing of T-Bills is a popular measure that CBSL adopt on behalf of GoSL to aid the latter to raise money to meet its monetary commitments. CBSL is the steward of GoSL debt. Prior to tomorrow’s largest ever weekly T-Bill auction, the previous largest ever T-Bill auction CBSL held was last week’s T-Bill auction for the issue of Rs 65,700 million worth of T-Bills.