Today’s administered, weekly Treasury (T) Bill auction for the sale of Rs 160 billion worth of T-Bills was successful, with Central Bank of Sri Lanka (CBSL) being able to sell the total parcel (Rs 160 billion) on offer, with nominal decreases seen in their weighted average yields (WAYs), aided by the deceleration in inflation.
Consequently, the WAYs of the 91, 182 and 364-day maturities fell by one, one and six basis points (bps) each to 25.65, 25.29 and 22.91 per cent, respectively, week on week (WoW) to today. However, to cap yield pressure, CBSL sold only 79.94 per cent (Rs 59,952 million) of the original 91 day maturity offer (Rs 75 billion) and the 182-days Rs 31,934 million (91.24 per cent) compared to its original offering of Rs 35 billion at today’s auction. But in the case of the 364 days, CBSL sold 136.23 per cent (Rs 68,114 million) compared to its original offering of Rs 50 billion made at today’s auction. Settlement is on Friday.
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 fortieth consecutive market week and that of only the 91 day maturity being greater (vis-à-vis the 364 day maturity) for the forty first consecutive market week to today are indications that the market expects yield pressure to last only in the ‘short’ term.
CBSL on behalf of the Government of Sri Lanka (GoSL) will have to repay maturing Treasury T- Bills of known tenures totalling Rs 74,804 million to the market by Friday.
Their splits are Rs 45,000 million 91-day maturities, Rs 9,230 million 182-day maturities and Rs 20,574 million 364-day maturities, respectively. Howbeit, 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 of unknown value and embedded together with a 364 day maturity and totalling Rs 2,000 million in full and a 91 day maturity also of unknown and embedded together with all three maturities and totalling Rs 27,250 million in full are also repayable to the market by tomorrow.
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.