Hike Stalled

Central Bank of Sri Lanka didn’t permit Wednesday’s primary Treasury (T) Bill auction to be fully subscribed, an indication that the market was asking for higher yields which CBSL/Treasury/Government of Sri Lanka was however not prepared to pay for,* a market source told this reporter.
Though the amount offered for reissue of maturing T Bills was a sum of Rs. 12,000 million; the market was allowed to subscribe to only Rs. 9,751 million despite receiving offers for 20,402 million, a sign that the majority of offers made were for higher yields at the T Bill primary market.
With demand controlled, the weighted average yield of the 91 day (three months) maturing T Bill went up by a mere one basis point week on week to 8.68%, while those of the 182 day (six months) and 364 day (one year) maturities stagnated at 8.71% and 9.30% respectively at that auction.
*Higher T Bill yields make GoSL’s borrowing costs to go up, similarly T Bill yields act as a benchmark to determine which path market interest rates should take.  A high interest rate regime makes borrowings more expensive, therewith dampening investments, a knock on effect of which is job creation.