Sri Lanka rejects bids at bill auction amid liquidity short
ECONOMYNEXT – Sri Lanka has rejected an entire 17.5 billion rupee auction of Treasury bills at this week’s auction as rates spiked and markets were short of liquidity, data from the state debt office showed.
At last week’s auction 3-month bills were auctioned at 8.07 percent and 12-month bills at 9.05 percent.
One year bills were quoted at around 9.15/30 percent on Tuesday and at 9.10/20 percent levels after the auction.
Six-month bills were last auctioned on August 21, for 8.60 percent.
The debt office is a unit of the central bank.
In the past when real bids at auctions were rejected, bills were purchased by the central bank with printed money, usually to sterilize foreign exchange interventions.
The interbank market is now short by over 22.86 billion rupees overnight on Wednesday with the central bank injecting cash through an overnight reverse repo auction below the ceiling 8.5 percent rate and the window.
On Wednesday only 3.5 billion rupees were injected from the window at 7.50 percent.
The severe cash shortage has coincided with a 750 million dollar bond maturing at National Savings Bank which had swap deals with the central bank. (Colombo/Sep19/2018)