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Sunday September 19th, 2021
Bonds & Forex

Sri Lanka fails to sell 50-pct of yield controlled bill auction

ECONOMYNEXT – Sri Lanka has failed to sell 50 percent of a 39.5 billion rupee bill auction, data from the state debt office showed, as price controls discouraged real bids.

The price controls on Treasuries auctions are persisting despite Sri Lanka’s foreign reserves running low due to liquidity from past failed auctions creating forex shortages and a suspension of convertibility driving a peg with the US dollar close to 230 to the US dollar in an OTC market.

Amid liquidity injections from yield controls, Sri Lanka is coming dangerously close to dollar sovereign default.

Bids are coming mostly to 3-month bills. On Monday, a 2031 bond auction was successful with a rate of 10.10 percent.

19.9 billion rupees of 3-month bills were sold at 6.08 percent, up 07 basis points, after offering 12.0 billion.

12.5 billion rupees of 6-month bills were offered but none sold.

Only 286 million rupees of 12-month bills were sold at 6.12 percent, despite offering 15 billion rupees.

Sri Lanka hiked overnight rates to 6.0 percent from 5.50 percent but it has done hardly any good, as price controls along the yield curve are failing Treasuries auctions, analysts say.

The central bank also hiked the statutory reserve ratio to 4.0 percent from 2.0 percent, and money printed to cover failed bill auctions since then had gone to sterilize the SRR hike. (Colombo/Sept15/2021)

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