• PDMO sells entire Rs. 48 b T-bill offering
• Yields unchanged despite recent pressure to rise
• Market submits Rs. 105 b in bids at auction

Last week’s Treasury bill (T-bill) auction marked the first time in months that the offering was fully subscribed, following a prolonged period of undersubscription amid weak market demand.

Increased borrowings and low liquidity among most major private banks had led to weaker demand for Government securities and higher bid rates over the past 3–4 months. 

However, the Central Bank of Sri Lanka (CBSL) refused to accommodate these trends, maintaining that there was no fundamental justification to allow yields to rise.

Ironically, in the aftermath of Cyclone Ditwah and amid concerns about its potential economic impact, the newly operational Public Debt Management Office (PDMO), established under the Ministry of Finance, Planning, and Economic Development, successfully sold the entire stock of T-bills on offer in its second auction – without permitting yields to increase.

Speaking to The Sunday Morning Business, First Capital Holdings Assistant Vice President – Research Ranjan Ranatunga stated that yields had risen only marginally over the past few weeks. 

He noted that the market was well aware that the CBSL intended to maintain yields at the current level. As a result, market participants were expecting bids to fall within this range.

Responding to a query on whether these results indicated that the market was finally aligning with the Government’s view that the current yields are appropriate, he responded: “I don’t think we can take away anything substantial from these results. It was a one-off thing. It is still too early to come to any conclusions from this auction.”  

The T-bill auction on Wednesday (10) saw the PDMO receive Rs. 105 billion worth of bids for the Rs. 48 billion-worth T-bills on offer.

At the auction, Rs. 10.6 billion of three-month bills had been sold at a Weighted Average Yield Rate (WAYR) of 7.51%, identical to the previous auction.

Similarly, Rs. 32.9 billion from the received bids of Rs. 65.3 billion for the six-month bills had been accepted by the CBSL at a WAYR of 7.91%, identical to the previous auction. 

Furthermore, Rs. 4.4 billion of 12-month bills had been sold at a WAYR of 8.03%, also identical to the previous auction.