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Fall Of One Year T Bill Stayed

  • Four Month Honeymoon Over

The benchmark 364 day (one year) Treasury (T) Bill primary yield  for the first time since the weekly primary auction of September 25,2013; remained unchanged without  falling, ie at Wednesday’s (January 22, 2014) auction, data maintained by this reporter showed.

Its weighted average yield (WAY) since the weekly primary auction of October 2, 2013 and leading up to the auction of January 13, 2014 had had continuously fallen week on week (WoW), totaling to 342 basis points (bps) to 7.15% along the way, before remaining unchanged and maintaining that percentage figure at Wednesday’s auction as well.

Meanwhile the 91 and 182 day maturities at the primary auctions during this period had seen their WAYs fall by 176 and 261bps to 6.84% and 7.02% respectively.

While the 182 day maturity,  WoW as at Wednesday (January 22) saw its WAY remain unchanged at 7.02%,  the WAY of the 91 day primary T Bill however fell by two bps WoW to 6.84% as at Wednesday (January 22).

Its falls during this period had had been aided and abetted by Central Bank of Sri Lanka (CBSL) cutting its standing lending facility (formerly known as the reverse repo rate) by 100 bps to 8% and its standing deposit facility (formerly known as the repo rate) by 50 bps to 6.50%.

These falls had been further buttressed by the swelling of excess liquidity due to the receipt of part of state owned NSB’s US$  ($) 750 million Bond proceeds to Central Bank of Sri Lanka’s (CBSL’s) foreign exchange (FX) reserves, resulting in CBSL crediting NSB with an equivalent amount of rupee liquidity.

This would have had then found its way to the Treasury and therewith to the market.

Another reason for the sharp fall in the WAYs of these tenures may have been due to market’s expectations that the proceeds of the recent $ one billion Sovereign Bond too would enter the money market, similar to that of NSB’s.

But that is allegedly not to be with part of those proceeds being allocated to meet Government of Sri Lanka’s (GoSL’s) foreign debt obligations and the balance for various other undisclosed purposes, it’s  learnt.

According to CBSL’s 2012 Annual Report, foreign debt servicing that year alone had cost GoSL a bill of $ 2,879 million ($ 2.879 billion).

Therefore yields appeared to have had bottomed out.

“But CBSL will try to maintain yields at these levels without allowing them rise,” market sources told this reporter.

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