T-Bill auction fails for 5th time

By Paneetha Ameresekere | Published: 2:00 AM Feb 24 2021

By Paneetha  Ameresekere

Yesterday’s weekly risk free Treasury (T) Bill primary auction marked a 5-in-a-row failure due to Central Bank of Sri Lanka’s (CBSL’s)/Government of Sri Lanka’s (GoSL’s) guided interest rate and exchange rate (ER) policies, complemented by a ban on bank client forward bookings till 26 April.

This was supposed to preserve the country’s sparse foreign reserves, but in the obverse it has ended up unsettling both the interest rate and ER markets.

CBSL’s desired effect came ‘too little, too late,’ i.e. of trying to make the market more liquid and hence having benign rate pressure vis-à-vis the T Bill auction by mandating exporters, after markets closed on Friday, to convert 25 per cent of their proceeds to rupees by selling such exchange rate (ER) holdings to CBSL, following the repatriation of such proceeds within a lapse of a maximum 180 days from the date of shipment, market sources told this reporter.

For instance, net excess liquidity, yesterday over Friday was uplift by only Rs 4,371 million (2.64 per cent) to Rs 169,664 million, they said.

Consequently, CBSL  was able to sell only 39.56 per cent (Rs 16,811 million) of the Rs 42.5 billion issue offered to the market yesterday, with the weighted average yields (WAYs) of the 91 and 182-day issues, nonetheless, though guided,  rising steeply by  eight and six basis points (bps) each week on week to  4.90 per cent and 4.99 per cent, respectively, while in the case of  the 364-day, which yield however was transparently capped at 5.09 per cent, ipso facto,  the WAY obtained being 5.09 per cent for that tenure.

By Paneetha Ameresekere | Published: 2:00 AM Feb 24 2021

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