MPBCs sharply up

By Paneetha Ameresekere | Published: 2:00 AM Sep 27 2021

By Paneetha Ameresekere 

Selling pressure of Treasury (T) Bonds and T Bills in secondary market trading on Friday to invest in tomorrow’s (Tuesday, 28 Sept) Rs 20 billion T Bond auction for better returns, the first auction after 16 months that Central Bank of Sri Lanka (CBSL) has not specified maximum administered yields (MAYs), inferring that they are allowing the market to determine yields, saw Government of Sri Lanka’s (GoSL’s) at least theoretical money printing borrowing costs (MPBCs) sharply increase by 6.51 per cent (Rs 2,556.95 million) to Rs 41,812.66 million on Friday. 

Market was short for the fourteenth consecutive market day to Friday thereby causing persistent rate pressure, though market shortfall decreased by 3.57 per cent (Rs 7,423 million) to Rs 200,612 million. 

GoSL’s face value (FV) MP debt decreased by 0.51 per cent (Rs 8,269.85 million) to Rs 1,602,320.61 million, thereby marginally defraying demand pull inflationary pressure on Friday. GoSL’s FVMP debt has been over one trillion rupees for a record 46 consecutive market days to Friday due to a lack of revenue.

 Liquidity increased by Rs 15,692.85 million (US$ 78.61 million) during trading due to the settlement/s of Central Bank of Sri Lanka’s (CBSL’s) swaps with the market and/or GoSL’s US dollar sales to CBSL on Friday. 

Conversions are based on Wednesday’s administered value of the benchmark ‘spot’ which was Rs 199.63 to the dollar. MPBCs are prorated to the weighted average yields fetched in secondary market trading of T Bills and T Bonds. CBSL, the steward of GoSL debt and foreign reserves, is not transparent in its open market operations data. 

CBSL deals in ‘spot,’ ‘spot’ trades are settled after two market days from the date of transaction. GoSL’s FVMP debt is equivalent to CBSL’s FV T Bills and T Bonds holdings. Investments in T Bills and T Bonds are riskless because in the event GoSL is unable to honour the repayment of such debt, CBSL is mandated to print demand pull inflationary money and repay that debt.

By Paneetha Ameresekere | Published: 2:00 AM Sep 27 2021

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