Treasury Bill Auction: Yields of 182, 364-Day Maturities Bottom-Out
By Paneetha Ameresekere
Efforts by the Central Bank of Sri Lanka (CBSL) to control rates of the 182 and 364 day maturities by offering Spartan amounts, a practice that began 44 weeks ago beginning with the weekly Treasury (T) Bill auction on 26 January, appeared to have ended at yesterday’s auction due to persistent inflationary pressure and uncertainty.
The auction saw the weighted average yields (WAYs) of the 182 and 364 day maturities shrink by only one basis point (bp) each Week on Week (WoW) to 8.02 and 8.16 per cent, though only 57.82 per cent (Rs 10,407 million) and 5.67 per cent (Rs 1,418 million) of the original parcels of Rs 18,000 million and Rs 25,000 million respectively, on offer to the market, were eventually sold.
Nonetheless, CBSL was able to sell the full complement of Rs 61,000 million worth of T Bills offered to the market by ‘overselling’ the 91 day maturity by 273.19 per cent (Rs 49,175 million) compared to its original offer of a mere Rs 18,000 million.
This phenomenon of CBSL accepting over 100 per cent of the offers made for the 91 day maturities in order to artificially maintain a low interest rate regime has been going on for the past 34 consecutive weeks.
In related developments, the value of T Bill maturities which will have to be repaid by tomorrow are Rs 59,129 million, the splits of which are Rs 33,306 million worth of 91 day maturities, Rs 5,462 million worth of 182 day maturities and Rs 20,361 million worth of 364 day maturities, respectively.
It may therefore be seen that the 91 day maturities and/or together with the 182 day maturity which has been sold far in excess of ‘demand’ yesterday, will be used to settle the maturing 364 day T Bills as well, leading to a persistent distortion of the market. CBSL is the steward of Government of Sri Lanka debt.