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Monday December 5th, 2022

Sri Lanka Treasuries auction fails amid re-structuring fears

ECONOMYNEXT – Sri Lanka sold 65 billion rupees of Treasury bills after offering 85 billion rupees at this week’s auction with yields rising and 22 percent of the offer unsold, data from the state debt office showed.

The debt office offered 35 billion rupees of 3-month bills and sold 60 billion with average yield rising 71 basis points to 28.43 percent.

25 billion rupees of 6-month bills were offered by only 1.6 billion rupees was sold with the yield kept unchanged at 28.97 percent.

25 billion rupees of 12 month bills were sold at a weighted average yield of 29.15 percent, down 04 basis points.

Sri Lanka had a series of successful Treasuries auctions after rates were allowed to go up and yields were gently falling when speculation intensified that rupee bonds would face a second ‘hair cut’.

When a currency falls and prices go up the economy inflates, bringing down the real value of the debt in an automatic debt sustainability.

However there had been speculation that foreign bond holders, who are protected by dollar denomination would demand a second hair cut from rupee bond holders whose dollar value has almost halved, leading to uncertainty.

Sri Lanka defaulted after its non-credible reserve collecting soft-peg (now called a flexible exchange rate) which is neither a clean float nor a consistent or hard peg, broke due to unsustainable policy rates.

Sri Lanka started employing aggressive open market operations to suppress rates from around 2011, and the currency has collapsed from 113 to 360 over 11 years, despite the country being at peace.

Aggressive open market operations worsened after 2015 with flexible inflation targeting leading to 3 currency crises over 6 years. The third currency crisis is now it is third year. (Colombo/Aug09/2022)

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Sri Lanka proposed power tariff not to recover past losses: Minister

ECONOMYNEXT – The government has not proposed a power tariff increase to recover past losses, Minister of Power and Energy Kanchana Wijesekera in response to a statement attributed the head of the power regulator commission.

“The proposal that was presented was for an automatic cost reflective tariff mechanism to be implemented to supply uninterrupted power & to recover the current cost of power supply,” Minister Wijesekera said in message.

“Govt has not proposed to recover past loses of CEB from a tariff revision…”

The cabinet of ministers had given the nod tariff revisions twice a year to prevent large losses from building up as in the past.

The Public Utilities Commission has disputed costs protected for the power utility saying the petroleum utility was keeping large margins in selling fuel.

The government in a budget for 2022 also proposed to tax surcharge to recover losses.

The regulator also disputed power demand forecasts.

Also read; Sri Lanka regulator disputes CEB costs, demand projections for 2023

The PUCSL cannot increase tariffs to recover past losses, Chairman Janaka Ratnayake said. (Colombo/Dec05/2022)

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Sri Lanka’s shares gain in mid market trade

ECONOMYNEXT – Sri Lanka’s shares edged up in mid day trade on Monday (05), continuing the positive run for seven straight sessions on news over a possible debt restructuring from Paris Club, analysts said.

All Share Price Index gained by 0.69% or 60.10 points to 8,829, while the most liquid shares gained by 0.96% or 26.59 points to 2,801.

“The market was pushed up over the news of a potential 10 year debt moratorium,” analysts said.

The Paris Club group of creditor nations has proposed a 10-year debt moratorium on Sri Lankan debt and 15 years of debt restructuring as a formula to resolve the island nation’s prevailing currency crisis. 

Related – Paris Club proposes 10-year moratorium in 15-year Sri Lanka debt re-structure: report

The market generated a revenue of 2.1 billion rupees.

Top gainers during 1130 hours were Expolanka, Browns Investment and LOLC.  (Colombo/Dec05/2022)


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Sri Lanka bond yields slightly down

ECONOMYNEXT – Sri Lanka’s bond yields were slightly down at open on Monday while t- bills were inactive, dealers said.

The Central Bank’s guidance peg for interbank transactions was at 363.18 rupees against the US dollar, appreciated from 363.19 rupees on Friday.

“Only one bond is being quoted today, and the rest remaining unquoted” a dealer said.

A bond maturing on 15.05.2026 quoted at 29.30/30.00 percent down from 29.50/75 percent at Friday’s close.(Colombo/ Dec 03/2022)

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