Selling pressure on treasuries

By Paneetha Ameresekere | Published: 2:10 AM Nov 26 2021

By Paneetha Ameresekere 

Government of Sri Lanka’s (GoSL’s ) at least theoretical money printing borrowing costs (MPBCs) sharply increased by 6.06 per cent (Rs 2,955.34 million) to Rs 51,740.90 million due to selling pressure of Treasury T-Bonds and T-Bills in secondary market trading, to reinvest in Monday’s T-Bond auction with expectations of better returns. Money market was short for the 54th consecutive market day to yesterday, thereby causing persistent rate pressure, though market shortfall fell by 0.79 per cent (Rs2, 412 million) to Rs 301,187 million. 

Money market liquidity during yesterday’s trading increased by Rs 4,292 million (US$ 21.20 million) due to the possible settlement/s of GoSL’s sales of US dollars to the Central Bank of Sri Lanka (CBSL) at Tuesday’s administered, albeit discounted ‘spot’ price of Rs 202.42 to the dollar and/or CBSL’s swaps with the market. GoSL’s face value (FV) MP debt decreased by Rs 1,880 million (0.10 per cent) to Rs 1,807,444.43 million (Rs 1.8074 trillion) yesterday, thereby marginally defraying demand pull inflationary pressure as well. 

GoSL’s FVMP debt has been over one trillion rupees for a record 86 consecutive market days to yesterday due to a lack of revenue. The interbank foreign exchange (FX) market was ‘dead’ for the 141st consecutive market day to yesterday with no outright transactions taking place, coupled with all trades in the FX market, including bank-client trades too, since midnight 6 September, mandated to be executed under a controlled exchange rate (ER) regime of between Rs 202-203 to the dollar, aiding in the spawning of a black market. 

Non-commercial consumer credit card trades such as for education and health may be executed at a premium of five per cent over the administered ER of Rs 203 to the dollar, leading to such trades being executed at the Rs 213-214 levels to the dollar. Commercial trades with approvals, which may involve the passing of speed money have to be executed at the administered and discounted price of Rs 203 to the dollar, after, apparently dipping into the country’s Spartan foreign reserves, to meet such commitments. 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 yesterday and year on year by between 9.61-9.26 per cent (Rs 17.80-17.20) to the dollar.

By Paneetha Ameresekere | Published: 2:10 AM Nov 26 2021

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