Inflation caps T-Bill sale
By Paneetha Ameresekere
Inflationary pressure put brakes in the fall in weighted average yields (WAYS) of Treasury (T) Bills after a lapse of two weeks at yesterday’s auction, resulting in Central Bank of Sri Lanka (CBSL) selling only Rs 28,477million (71.19 per cent) of the original issue of Rs 40,000 million to keep costs down.
WAYs fetched at this auction were 4.51 per cent and 4.64 per cent for the 91 and 182 day maturities, down one basis point (bp) each week on week (WoW), while that of the 364 day maturity stagnated at 4.88 per cent, WoW.
In other developments, the benchmark ‘spot’ fell for the second consecutive market day to yesterday, this time sharply by 55 cents to Rs 185.00/10 to the US dollar in two way quotes as at 4p.m. yesterday, market sources told this reporter, due to a virtual, continuous stream of foreign exits from the financial markets led by the bourse due to uncertainty.
In the calendar year to 4p.m. yesterday, the ‘spot’ has weakened by Rs 3.70 (2.04 per cent) in two way quotes, thereby causing cost-push inflationary pressure as Sri Lanka is an import dependent economy
However, Government of Sri Lanka’s (GoSL’s) money printing borrowing costs (MPBCs) decreased by 16.79 per cent (Rs 45.58 million) to a negative (-)Rs 317.03 million led by investor appetite for risk free T Bonds, followed by GoSL’s face value money printing (FVMP) debt decreasing by 0.91 per cent (Rs 2,765million) to Rs 300,939.41 million, thereby part alleviating demand-pull inflationary pressure as well, yesterday.
Meanwhile, the country’s foreign reserves were poorer for the fourth consecutive market day to yesterday, with yesterday’s figure being US$ 39.53 million (Rs 7,289 million) due to the settlement/s of GoSL’s foreign debt servicing commitments and/or CBSL returning swapped dollars to the market. Conversions are based on the middle rate of the ‘spot’ as at 4p.m. on Monday which was Rs 184.35 to the dollar.
In the four market days to yesterday, due to such external commitments, the country’s foreign reserves have bled by $ 214.60 million (Rs 39,610 million) due to such commitments.
Howbeit, CBSL, the steward of the country’s debt and of its foreign reserves, operations is not transparent, because it keeps mum in regard to the causes for the changes in market liquidity among other things due to its intervention in daily open market operations.
Meanwhile, led by the aforesaid external commitments, market’s net excess liquidity declined by 5.58 per cent (Rs 10,054 million) to
Rs 170,022 million yesterday.