Sri Lanka sells fewer Treasuries than offered; more rupee pressure feared

ECONOMYNEXT – Sri Lanka sold 12.42 billion rupees of Treasury bills at Wednesday’s auction, after offering 20 billion rupees of bills for sale, raising fears of more money printing and pressure on the currency.
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The debt office sold 4.33 billion rupees of 12-month bills at an average yield of 6.93 percent down one basis point from a week earlier.
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The debt office also sold 8.0 billion rupees of 6-month bills at an average yield of 6.50 percent, sharply down from 6.87 percent two weeks ago. All bids for 6-mont bills were rejected last week.
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The Central Bank is estimated to have printed at least 28 billion rupees last week and the rupee is now falling like a uni-directional crawling peg in the days of 1980s, when fiscal and monetary policy were both loose.
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This week another 10 billion rupees may be printed to repay bill holders. At one time the Central Bank released the data on Treasury bills take to its balance sheet at each auction.
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When money is printed to repay bill holders, the liquidity expands reserves in the banking system generating credit, demand, imports, currency pressure and eventually inflation.
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The rupee has fallen more from around 131 to the US dollar to below 142, since January when the current administration came to office. (Colombo/Nov18/2015)
 

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