ECONOMYNEXT – Sri Lanka’s Treasuries yields rose across maturities with the 12-month yield rising 22 basis points to 8.45 percent despite lower than offered amounts being accepted from Wednesday’s auction, data from the state debt office showed.
The 3-month yield rose 06 basis points to 7.51 percent with 2.5 billion rupees of bills being offered for sale and only 511 billion rupees of bids being accepted.
The 6-month yield rose 32 basis points to 7.97 percent, with 10 billion rupees of bills being offered and only 3.8 billion being sold.
In 12-month bills, 12.5 billion rupees of bills were offered and 13.6 billion rupees of bills were sold.
The debt office offered 25 billion rupees of bills and only 18.0 billion was sold.
Sri Lanka slashed valued added tax from December reducing tax revenues.
If rates are allowed to go up and money is not printed to keep rates down, the rupee and economy will remain stable, analysts have said.
Sri Lanka’s central bank reversed monetary policy around July ending inflow sterilization and has injected money into the banking system to keep rates down.
The central bank under Governor Indrajit Coomaraswamy also broke a prudential rule set by then Governor A S Jayewardene and started buying long term bonds to print money through open market operations.
Ironically the move came as the central bank said it will stay away from direct purchases of bills from auctions because it introduces ‘high powered money’ to the banking system.
In December real money demand goes up.
But on December 17, banks deposited 44.9 billion rupees in excess liquidity at the central bank up from 36 billion rupees a day earlier. (Colombo/Dec18/2019)