WAY of 2025 maturity rises 135 BPs
By Paneetha Ameresekere
Abnormally high rising rate pressure due to double digit inflation, Government of Sri Lanka’s (GoSL’s) high borrowing appetite and sustained uncertainty saw yesterday’s Treasury (T) Bond auction being partially successful for the second consecutive time, despite weighted average yields (WAYs) being allowed to sharply increase by a range of between 40 and a massive 135 basis points (bps) by the Central Bank of Sri Lanka (CBSL).
The weighted average yield (WAY) of the 2025 maturity increased steeply by 135 bps to 11.05 per cent, the 2027 maturity by 80 bps to 11.70 per cent and the 2031 maturity by 40 bps to 12.01 per cent, respectively at yesterday’s auction.
Despite such high yields offered, CBSL sold only 63.74 per cent (Rs 7,968 million) of the 2025 maturity and 58.08 per cent (Rs 7,260 million) of the 2027 maturity offered at yesterday’s auction, due to even higher yields asked for by the market. Each of the original parcels offered were valued at Rs 12,500 million.
However, CBSL sold 100 per cent (Rs 25 billion) of the 2031 maturity offered, thereby, on an overall basis selling 80.46 per cent (Rs 40,228 million) of the cumulative total of Rs 50,000 million originally offered at yesterday’s auction.
Meanwhile, in the week ended next Friday (21 January), CBSL, on behalf of GoSL may have to borrow a record, albeit a minimum of Rs 188 020 million in T Bills, inclusive of today’s auction for the sale of Rs 81,000 million worth of T Bills as well as another auction for the sale of a minimum of a another record Rs 97,250 million next week, to meet maturing T Bills held by the market, discounting of such held by the CBSL as well.
These developments come in the backdrop that CBSL’s next “monetary policy outlook” will be out next Thursday (20 January), ie a day before CBSL having to meet the aforesaid T Bill commitments. CBSL is the steward of GoSL debt.
Comparisons of yesterday’s auction results are made with the results obtained in CBSL’s T Bond auction of 13 December 2021, where all of the aforesaid tenures offered then, were successfully sold vis-à-vis their original amounts offered.