Sri Lanka Treasuries yields absolutely flat

ECONOMYNEXT – Sri Lanka’s Treasury bill yields were absolutely flat across all maturities, data from the state debt office showed, amid fears that the auction was only partially successful.

The debt office said it sold 586 million rupees of 3-month debt managing to keep the average weighed at 8.45 percent exactly the same rate as last week.

It also sold 11.3 billion rupees of 6-mont bills at 9.53 percent, exactly the same rate as last week and 938 million rupees of 12-month bills at 10.17 percent exactly the same rate as last week.

The debt office only sold 12.8 billion rupees of debt, when about 26.5 billion rupees of bills were estimated to be maturing this week.

Such absolute flat rates, with billions of rupees being printed to repay maturing bills has been hallmarks of past balance of payments crisis.

Though the central bank has raised 15 year debt paying as much as 14.75 percent it has failed to rollover maturing debt, triggering excess demand and credit growth.

Repaying maturing debt with printed money expands the money supply permanently.

The partially failed Treasuries auction comes after a string of successful auctions and several weeks of relatively tight monetary policy where interbank markets were kept short and supplied with overnight money. (Colombo/April27/2016)