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Sri Lanka Treasuries yields steady at auction, no printing seen

ECONOMYNEXT – Sri Lanka Treasuries yields were steady at Wednesday’s auction with 30 billion rupees in bills offered and the full volume sold, data from the debt office showed.

The debt office, which is a unit of the central bank sold 8.0 billion rupees of 3-month bills at 6.69 percent, down 02 basis points from a week earlier after offering 8.0 billion rupees.

11.0 billion rupees of 6-month bills were sold to yield 6.82 percent, down 01 basis point from a week earlier, after offering 6.0 billion rupees.

16 billion rupees of 12-month bills were sold to yield 6.93 percent unchanged from a week earlier after offering 16 billion rupees.

With all the offered volumes sold appears to be printed to keep rates down.

However from 2019 the central bank broke a prudential rule set by then Governor A S Jayewardene to stop monetary instability though outright purchases of long term bonds from other holders.

When the central bank buys Treasuries instead of rolling them over at a market rate, or buys bond from a bank, a paper debt is transformed into a bank note expanding reserve money and loanable rupee reserves of banks

The newly created money will put pressure on the currency if domestic credit (the combined state and private credit) is positive. (Colombo/May27/2020)

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