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Sunday June 26th, 2022

Sri Lanka injects Rs60bn for 40 days below risk free yield

ECONOMYNEXT – Sri Lanka injected 60 billion rupees into the banking system for 40 days at 22.6 percent on May 19, below the three month Treasury bill yield, despite severe fuel and cooking gas shortages.

On May 10, another 69.5 billion rupees was injected at 23.05 percent for 59 days in a term auction, below the 6-month Treasury bill yield.

Since April 22 the central bank has injected 189.5 billion rupees into banks for periods ranging from 22 to 59 days.

The liquidity injections are coming despite Sri Lanka being in the middle of the worst currency crisis triggered by the 72-year-old intermediate regime central bank and the country is facing social unrest and energy shortages.

The central bank last week also rejected the bulk of a bill auction with bids reaching towards 30-percnet near the 29.8 percent inflation created by the central bank in the past 12-months.

The central bank has used open market operations to target the short term yield curve and also bought bonds outright jettisoning a bills only policy in the course of yield curve targeting in previous currency crises. (Colombo/May20/2022)

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