At today’s Rs 140 billion administered weekly T Bill auction, Central Bank of Sri Lanka (CBSL), the steward of Government of Sri Lanka (GoSL) debt, in a vain bid to contain yield pressure, sold only 55.72 and 56.77 per cent of the 182-day and the benchmark 364-day maturities to the market, compared to their original offers.
Consequently, the weighted average yields (WAYs) of the 182 and 364-day maturities remained unchanged at 25.42 and 23.14 per cent, week on week (WoW), though the 91-day’s WAY made a pyrrhic two basis points (bps) WoW fall to 25.80 per cent at today’s auction.
Today’s auction’s sales splits were 91 days Rs 98,676 million or 123.35 per cent of its original offering (Rs 80 billion), 182 days Rs 16,715 million (55.72 per cent) compared to its original offering of Rs 30 billion and 364 days, Rs 17,030 million (56.77 per cent) compared to its original offering of Rs 30 billion, respectively.
Nevertheless, 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 seventh consecutive market week and that of only the 91 day maturity being greater (vis-à-vis the 364 day maturity) for the thirty eighth 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 Treasury (T) Bills of known tenures totalling Rs 51,977 million (Rs 52 billion) to the market by Friday. Their splits are Rs 34,836 million 91-day maturities, Rs 1,994 million 182-day maturities and Rs 15,147 million 364-day maturities, respectively. Howbeit, maturing T Bills held by the CBSL and also repayable by Friday are unknown as CBSL the steward of GoSL debt doesn’t disclose such figures.
Additionally another 182-day maturity, embedded in both 182 and 364-day maturities and totalling Rs 1,390 million in full is also repayable to the market by Friday. However, CBSL hasn’t given their separate splits, ie the value of the 182-day maturity separately and the value of the 364-day maturity embedded in the above full total of Rs 1,390 million.
Further, another 91 day maturity, embedded in both 182 and 364 day maturities together as well and totalling Rs 71,404 million in full is also repayable to the market by Friday. However, like as the above, CBSL hasn’t given their separate splits, ie the values of the 91-day, 182-day and the 364-day maturities embedded in the above full total of Rs 71,404 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.