Offers for 182, 364 Day Maturities Rejected
By Paneetha Ameresekere
Central Bank of Sri Lanka (CBSL) in a bid to control yields rejected offers made for both the 182 and 364 day maturities at yesterday’s largest ever weekly Treasury T-Bill auction, an auction for the sale of Rs 85,000 million worth of face value (FV) T-Bills, accepting offers for only the 91 day maturity, though allowing its weighted average yield (WAY) to sharply increase by 89 basis points (bps) week on week (WoW) to 8.04 per cent due to a combination of inflation and uncertainty.
Subsequently CBSL accepted only part of the offers made for the 91 day maturities, i.e. Rs 50,416 million, though that was equivalent to 168.05 per cent of the original offer of Rs 30,000 million laid on the table at yesterday’s auction.
The value of the total number of offers made for this parcel was Rs 83,373 million. The total FV of T-Bill maturities that have to be repaid by tomorrow (Friday, 15 October) is Rs 84,095 million, translating to the fact that the shortfall may have to be met by a bout of demand pull inflationary FV money printing (FVMP) if CBSL has not already done so.
Meanwhile, in the four consecutive weeks to yesterday, the WAY of the 91 day maturity has increased by 196 bps, since CBSL semi-liberalised Treasury yields beginning with the T-Bill auction of 22 September.
CBSL and the Government of Sri Lanka (GoSL) want to maintain an artificially low interest rate regime despite pressure to the contrary to keep GoSL’s borrowing costs low and to spur growth. CBSL is the steward of GoSL debt. Issuing of T-Bills is a popular way of meeting GoSL’s monetary commitments. MP is the sole and mandated prerogative of CBSL.