CBSL stops specifying MAYs at Wednesday’s auction
By Paneetha Ameresekere
Coinciding with the appointment of former Money, Capital Markets and State Enterprises Reforms State Minister Ajith Nivard Cabraal as Central Bank of Sri Lanka (CBSL) Governor last week, CBSL for the first time after 75 weeks stopped specifying maximum administered yields (MAYs) at a weekly Treasury (T) Bill auction vis-à-vis its announcement of Wednesday’s (22 September) auction made on Friday (17 September).
CBSL at that auction is offering Rs 39,500 million worth of T Bills comprising Rs 10,000 million 91-day maturities, Rs 13,000 million 182-day maturities and Rs 16,500 million 364 day maturities, respectively.
Meanwhile, beginning with the T Bill auction of 6 April 2020, CBSL started specifying the MAY acceptable for the benchmark 364-day maturity in a bid to control rate pressure to keep borrowing costs down.
This controlled interest rate regime was gradually expanded to cover the remaining two tenures as well beginning with the T Bill auction of 13 May 2020, where the MAYs of the 91 and 182-day maturities were begun to be specified.
Nonetheless, such focused controls were reverted once more to cover only the 364-day tenure beginning with the T Bill auction of 10 February 2021. This pattern continued up to last Wednesday’s (15 September) T Bill auction where the MAY specified for the 364-day maturity was 6.12 per cent.
The MAYs of the other two tenures though not specified were accepted at lower rates over the weighted average yield (WAY) accepted for the 364-day maturity. However, if the bids for the 364-day maturity were rejected and if one or both of the other two maturities were sold at a particular auction, there unwritten MAYs were lower than the written MAY of the 364-day maturity. Issuing of T Bills is a key way Government of Sri Lanka raises money from the market to meet its commitments.