ECONOMYNEXT – Sri Lanka’s 12-month Treasuries yield fell 17 basis points to 8.21 percent at Wednesday’s auction despite the a higher than offered volume being accepted, data from the state debt office showed.
The debt office offered 13 billion rupees of 12-month bills and accepted 14.33 billion rupees at a weighted average yield of 8.21 percent.
In recent weeks after monetary instability ended and private credit fell, the debt office has generally accepted the exact volumes offered allowing rates to fall fast.
After earlier balance of payments crises, the debt office had slowed rates coming down by accepting higher than expected volumes.
The debt office at one time also used to print money and buy a portion of the bills when private credit was strong, firing yet more private credit and triggering balance of payments crises.
Not accepting the full volume also discourages the entry of more funds to bill markets, which will cut consumption and keep rates at the next auction lower than it would otherwise have been.
Wholesale money printing by direct intervention at auctions is expected to be outlawed in a change to the monetary law act, though President Maithripala Sirisena had wanted money printing to continue, reports said.
The debt office accepted only 1.16 billion rupees of 6-month bills after offering 2.5 billion rupees, at a weighted average yield of 7.94 percent down 02 basis points from a week earlier, preventing the six month yield from going up.
The 3-month yield fell to 4 basis points to 7.85 percent with the all the offered 6.5 billion rupees of bills being accepted (Colombo/July31/2019)