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Sri Lanka’s treasuries yields fall across maturities

ECONOMYNEXT – Sri Lanka’s Treasury bills yields fell across maturities, with exact pre-announced volumes taken, with the 12-month yield down 11 basis points to 8.59 percent, data from the state debt office showed.

The 3-month yield fell 07 basis points to 8.17 percent and the 6-month yield fell 17 basis points to 8.32 percent.

The debt office, which is a unit of the central bank offered 7.5 billion rupees of 3-month bills, 3.5 billion rupees of 6-month bills and 12 billion rupees of 12 month bills and accepted the exact volumes, without misleading market participants.

Sri Lanka’s interest rates are falling after the end of a balance of payments crisis, as private credit has weakened, despite a fall in state tax revenues from an import collapse.

In the past after balance of payments crises the central bank used to accept higher than announced volumes of bills, or shift volumes between maturities, preventing a quick fall of rates by misleading market participants.

When private credit picked up, the debt office also printed money preventing a quick rise of rates and boosting private credit with printed money, triggering balance of payments crises.

However the central bank has halted direct interventions in bond auctions and only buys bills to sell reserves to the Treasury, which does not alter reserve money. (Colombo/July03/2019)

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