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Sri Lanka fails to sell 43-pct of bill auction under price ceilings

ECONOMYNEXT – Sri Lanka has failed to sell 43 percent of bills offered at a 40 billion rupee auction under price ceilings on Tuesday, for the second week in a row, data from the state debt office showed, amid pressure on the currency.

On January 26, the debt office which is a unit of the central bank offered 40 billion rupees for auction under price ceilings and sold only 22.7 billion rupees leaving 43 percent unsold.

Unsold bills are bought by the central bank expanding reserve money, putting pressure on the currency and driving up stock prices, analysts say.

There is no information on how much bills are already held by the central bank which can be rolled over without changing reserve money.

Any central bank held bills which are sold to outsiders will reduce liquidity and save an equal amount of foreign reserves, or prevent currency depreciation or both.

By acquiring maturing bills, or bonds, the central bank will end up monetizing deficits of past years, critics say.

Aft the failure of the last auction price ceiling were raised by 01 basis point to 4.71 percent for 3-month bills, 03 basis points to 4.80 percent for 06 month bills and 03 basis points to 5.02 percent for 12-month bills.

Te debt office offered 8.0 billion rupees of 3-month bills and sold 5.69 billion rupees at 4.70 percent, up 01 basis point.

The debt office offered 4,000 rupees of 6-month bills and sold 310 million rupees, up 03 basis points.

It offered 28 billion rupees of 3-month bills and sold 16.7 billion rupees at 5.02 percent up 04 basis points. (Colombo/Feb03/2021)

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