T-Bill Yields Rise Led by Uncertainty

Weighted average yields (WAYs) of the 91, 182 and 364-day maturities rose by 19, eight and 18 basis points (bps) each to 25.66, 25.30 and 22.97 per cent, respectively, week on week (WoW) at today’s Rs 160 billion Treasury (T)-Bill auction, haunted by sustained uncertainty and high, double digit inflation.

To cap further yield pressure, Central Bank of Sri Lanka (CBSL) sold only 78.04 per cent (Rs 124,865 million) of the original offer (Rs 160 billion) at today’s auction.
The auction’s sales splits were 91 days Rs 64,379 million or 80.47 per cent of its original offering (Rs 80 billion), 182 days Rs 64,379 million (80.47 per cent) compared to its original offering of Rs 40 billion and 364 days, Rs 25,657 million (89.14 per cent), also compared to its original offering of Rs 40 billion, respectively.

The fact that the WAY of the longer tenure 364 maturity being smaller than both the shorter tenure 91 and 182 day maturities for the thirty ninth consecutive market week and that of only the 91 day maturity being greater (vis-à-vis the 364 day maturity) for the fortieth consecutive market week to today are indications that the market expects yield pressure to last only in the ‘short’ term. Settlement is on Friday.

CBSL on behalf of the Government of Sri Lanka (GoSL) will have to repay maturing T- Bills of known tenures totalling Rs 64,841 million to the market by Friday.

Their splits are Rs 24,463 million 91-day maturities, Rs 14,766 million 182-day maturities and Rs 25,612 million 364-day maturities, respectively. However, maturing T-Bills held by the CBSL and also repayable by tomorrow are unknown as CBSL the steward of GoSL debt doesn’t disclose such figures.

Additionally another 182-day maturity totalling Rs 1,231 million and a 91 day maturity of unknown value and embedded in all three maturities and totalling Rs 7,133 million in full is also repayable to the market by Friday. Nevertheless, CBSL hasn’t given their separate splits, ie the values of the 91-day maturity, 182-day maturity and the 364-day maturity embedded in the above full total of Rs 7,133 million, separately.

Investments in T-Bonds and T-Bills are generally risk free, because, in the event GoSL is unable to repay such debt, CBSL is usually mandated to print demand-pull inflationary money and repay such creditors. Money printing is the CBSL’s sole and exclusive prerogative. CBSL is the steward of GoSL debt. GoSL’s FVMP debt is the value of T-Bills and T- Bonds in CBSL’s holdings. Selling T Bills and T Bonds to the domestic market is a popular way that GoSL raises money to meet its local needs.