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Sunday July 25th, 2021
Bonds & Forex

Sri Lanka fails to sell 27-pct of bill auction under price ceiling

ECONOMYNEXT – Sri Lanka has failed to sell 27 percent of a 64 billion rupee Treasuries auction despite a 01 basis point de facto policy rate which serves as a price control.

The debt office, which is a unit of the central bank, sold 46.14 billion rupees of bills, heavily skewed towards 3-month tenor.

46.03 billion rupees of 3-month bills were sold at 5.22 percent, up 01 basis point from a week earlier, after offering 24 billion rupees.

There were no sales of 6-month bills though there were 20.03 billion rupees of perfunctory bids.

112 million rupees of 12-month bills were sold at a yield of 5.25 percent, up 01 basis point.

A price ceiling on 12-month bills was raised by 01 basis point to 5.26 percent before the auction.

The ceiling rate serves as a de facto policy rate as unsold bills are monetized and liquidity injected to fatten bank rupee reserves, triggering forex shortages.

It is not clear how much of the offered bills are already with the central bank.

Last week with all offered bills sold to real buyers, the central bank sold down a 4 billion rupee tranche of its bill stock potentially saving forex reserves that would be have been used to redeem the rupees at a peg of 203 to the dollar. (Colombo/Aug19/2021)

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