Monday Markets: Selling Pressure on Treasuries
By Paneetha Ameresekere
Government of Sri Lanka’s (GoSL’s ) at least theoretical money printing borrowing costs (MPBCs) sharply increased by 10.91 per cent (Rs 6,565.99 million) to Rs 66,753.18 million yesterday due to selling pressure of Treasury T-Bonds and T-Bills in secondary market trading for investments in tomorrow’s Rs 56.5 billion T-Bill auction on expectations that Central Bank of Sri Lanka (CBSL) will allow yields to increase due to sustained inflationary pressure and uncertainty. GoSL’s non-demand pull inflationary face value (FVMP) debt increased by Rs 324 million, therewith marginally increasing its FVMP debt as a whole by 0.02 per cent to Rs 1,734,638.03 million (Rs 1.7346 trillion) yesterday.
GoSL’s FVMP debt has been over Rs one trillion for a record consecutive 65 market days to yesterday due to a lack of revenue. Money market was short for the thirty third consecutive market day to yesterday , thereby causing persistent rate pressure, with market shortfall increasing by 0.78 per cent (Rs 1,339 million) to Rs 173,178 million yesterday.
Liquidity decreased by Rs 1,663 million (US$ 8.29 million) during yesterday’s trading due to the possible settlement/s of GoSL’s foreign debt servicing commitments and/or Central Bank of Sri Lanka’s (CBSL’s) release of US dollars from the country’s foreign reserves at the discounted price of Rs 203 to the US dollar for the import of so called essential items and/ or CBSL’s swaps with the market and/or CBSL’s dollar sales/swaps to/with GoSLSL . Conversions are based on Thursday’s administered value of the benchmark ‘spot’ which was Rs 200.51 to the dollar. CBSL lacks transparency in its open market operations data.
Dead 120 Days
The interbank foreign exchange (FX) market was ‘dead’ for 120th consecutive market day to yesterday (Monday 25 October), with no outright transactions taking place and with all trades in the FX market, ipso facto made worse by bank-client trades too, since midnight on 6 September, having to be executed under a controlled exchange rate (ER) regime of between Rs 202-203 to the US dollar, thereby aiding in the spawning of a black market. However, non-commercial consumer credit card trades such as for education and health, may be executed at a premium of five per cent, leading to such trades being executed at the Rs 213-214 levels to the dollar, sources said. But, commercial trades, with necessary approvals, which in several cases involve the passing of speed money due to the advent of the ‘licensing Raj,’ have to be executed at the administered price of Rs 203 to the dollar, they said.
Even at the Rs 213-214 levels, the ER will have had depreciated by between Rs 24.50- 25.50 (13-13.53 per cent) in the calendar year to date and year on year (YoY) by between Rs 28.55-29.55 (15.48-16.02 per cent), thereby causing cost-push inflationary pressure as Sri Lanka is an import dependent economy. Meanwhile, even at the controlled ER of Rs 203, the ER will have had depreciated by 7.69 per cent (Rs 14.50) in the calendar year to Friday and year on year by 10.06 per cent (Rs 18.55) to the dollar, thereby causing cost-push inflationary pressure.
Subhead: CBSL to Sell Rs 56.5B T Bills CBSL data released on Friday showed that in its weekly T Bill auction due tomorrow, it will be offering Rs 56,500 million worth of T-Bills to the market to repay maturing T-Bills of FV Rs 52,176 million which will have to be settled by the coming Friday. The splits for tomorrow’s auction comprise Rs 15,000 million worth of 91 day maturity T-Bills, Rs 17,500 million worth of 182 day T-Bills and Rs 24,000 million worth of 364 day T-Bills respectively. Meanwhile, the splits of the T Bill maturities which will have to be repaid by the coming Friday comprise Rs 24,707 million worth of 91 day maturity T-Bills, Rs 4,034 million worth of 182 day T-Bills and Rs 23,435 million worth of 364 day T-Bills respectively.