27 October T Bill Auction for 182 & 364-Day Tenures: CBSL Increases MAYs by 84 bps each
By Paneetha Ameresekere
Central Bank of Sri Lanka (CBSL) on Thursday (22 October) sharply increased the maximum administered yields (MAYs) that primary dealers can quote for the 182 and 364 -day maturities at next Tuesday’s (27 October) weekly risk free Treasury (T) Bill auction by 84 basis points (bps) each to 4.71 and 4.97 per cent, compared to the weighted average yields (WAYs) of 3.87 and 4.13 per cent each these tenures fetched at Wednesday’s (22 October) auction.
Wednesday’s (22 October) T Bill auction saw the WAYs of the 182 and 364 T Bill tenures sharply fall by 84 and 86 bps each, week on week to 3.87 and 4.13 per cent respectively, on expectations of a rate cut led by ‘COVID-19 uncertainty’ at Thursday’s (22 October) Monetary Board meeting. However, the Monetary Board kept CBSL’s policy rates unchanged at 4.5 per cent (borrowing) and 5.5 per cent (lending) respectively at this meeting, held after markets closed, on Thursday (22 October). The MAYs that had been fixed for Wednesday’s (21 October) auction were 4.71 and 4.99 per cent, 84 and 86 bps more than the WAYs ultimately fetched at this auction.
However, the MAY for the 91 -day tenure for which tenure, all offers made by the market at Wednesday’s (21 October) auction were rejected by CBSL, has remained unchanged at 4.59per cent for next Tuesday’s (27 October) weekly T Bill auction.
CBSL is the steward of the country’s debt and of its foreign reserves. Investments 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.