CBSL sells only 26.21% of T Bonds

By Paneetha Ameresekere | Published: 2:00 AM Apr 12 2021

By Paneetha Ameresekere 

Central Bank of Sri Lanka (CBSL) allowed the sale of only 26.21 per cent (Rs 10,485 million) of the totality of Rs 40,000 million worth of Treasury (T) Bonds on offer at Friday’s auction due to higher yields sought by the market.

CBSL has capped rates in order to spur the economy which was growth contract by a historically low figure of 3.6 per cent, last year, hence the reason behind the poor performance of Friday’s T Bond auction.

The failure of Friday’s T Bond auction signifies two things; There would be a splurge of demand-pull inflationary money printing (MP) by CBSL due to a lack of Government of Sri Lanka (GoSL) revenue, thereby increasing GoSL’s MP debt closer to the Rs one trillion mark, coupled with that, all indications point out to a failure  at today’s (Monday, 12 April) weekly Rs 45,000 million T Bill auction a well, thereby increasing such ‘T Bill auction failures’ to ‘6-in-a-row.’ GoSL’s face value MP debt as at Friday stood at Rs 921,281.94 million.

Meanwhile, of the two parcels offered at Friday’s T Bond auction, namely the 2023 and 2028 maturities, CBSL sold only 28.58 per cent (Rs 7,145 million) and 22.27 per cent (Rs 3,340 million) of those parcels, compared to their original values at Friday’s auction. The weighted average yields fetched at Friday’s auction superimposed with their maximum administered yields (MAYs), ie at, 6.30 per cent and 7.70 per cent for the 2023 and 2028 maturities, respectively. 

 Investments in T Bills and T Bonds are considered riskless, because, in the event GoSL is unable to honour such debt, CBSL is mandated to print demand pull inflationary money (money printing) and repay such creditors. Money printing exclusive rights are with CBSL.  

By Paneetha Ameresekere | Published: 2:00 AM Apr 12 2021

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