• Yields decline for 5th consecutive week

Treasury bill (T-bill) yields fell for the fifth consecutive week at the mid-week auction, as the yields of the short-term tenors continue to close in on the Standing Lending Facility Rate (SLFR) of 9.50%.

Increased liquidity in the system and the growing likelihood of Sri Lanka reaching a final agreement with its commercial creditors have seen yields plummet over the past few weeks to single digits. 

This marks a drastic change in the conditions of the Government securities market, which saw its T-bill yields in the primary market peak at 27.71% as of 15 February 2023 amidst a possibility of local debt restructure.

According to market sources, the yields of three-month T-bills have likely bottomed out as they stand just above the SLFR level of 9.5%. Meanwhile, the six- and 12-month T-bills have more room to move downwards.   

Data published by the Central Bank of Sri Lanka (CBSL) revealed that it had received bids totalling Rs. 287.9 billion for the Rs. 155 billion worth of T-bills on offer at the auction on Wednesday (8). 

Accordingly, at the auction, Rs. 30 billion from the received bids of Rs. 61.8 billion for the three-month bills had been accepted by the CBSL at a Weighted Average Yield Rate (WAYR) of 9.43%, down 18 basis points from the previous auction. 

Similarly, Rs. 92.5 billion from the received bids of Rs. 151.1 billion for the six-month bills had been accepted by the CBSL at a WAYR of 9.76%, down 13 basis points from the previous auction. 

Furthermore, Rs. 32.5 billion from the received bids of Rs. 75 billion for the 12-month bills had been accepted by the CBSL at a WAYR of 9.90%, down nine basis points from the previous auction.