• 12-month tenor moves below 10% level for 1st time in current cycle
• All 3 short-term tenors now trading below 10% level
• Demand for Govt. securities remains robust

Treasury bill (T-bill) yields fell by double digits across all tenors at last week’s auction, which saw the 12-month tenor move below the 10% level for the first time in the current cycle, leaving all three short-term tenors now trading below the 10% level.

Data published by the Public Debt Management Office (PDMO) revealed that bids totalling Rs. 374.3 billion had been received at the auction held on Wednesday (19) against Rs. 140 billion on offer, with the PDMO accepting the full Rs. 140 billion, leaving the auction oversubscribed by 2.67 times. 

While the volume of bids eased marginally from the Rs. 386 billion received at the previous auction, demand for Government securities remained robust.

The three-month T-bill eased by 22 basis points to a Weighted Average Yield Rate (WAYR) of 9.22%, the six-month by 18 basis points to 9.6%, and the 12-month by 10 basis points to 9.91%.

This sharp decline marked a sixth consecutive week of easing in the primary market and brought all three maturities below the 10% mark, with the 12-month yield dropping under the threshold for the first time in the current cycle.

The continued easing came even as inflation remained elevated. According to the Daily Economic Indicators published by the Central Bank of Sri Lanka (CBSL), the Year-on-Year (YoY) change in the Colombo Consumer Price Index (CCPI) stood at 7.3% in July. The Average Weighted Prime Lending Rate (AWPR) rose to 10.95%, up from 10.76% a week earlier.

Overnight market liquidity stood at Rs. 142.85 billion as of Tuesday (18), down from Rs. 161.35 billion the previous day and from Rs. 194.03 billion a week earlier on 11 August, though it remained well above the levels seen through much of June, when the market had experienced an acute liquidity shortage that had seen the figure fall to as low as Rs. 40.1 billion.

During last week’s auction, bids worth Rs. 172.41 billion were received for three-month bills against Rs. 55 billion on offer, with the full Rs. 55 billion accepted at a WAYR of 9.22%, down 22 basis points from the previous auction.

Similarly, Rs. 121.82 billion in bids was received for six-month bills against Rs. 45 billion on offer, with the full Rs. 45 billion accepted at a WAYR of 9.6%, down 18 basis points from the previous auction.

Meanwhile, Rs. 80.11 billion in bids was received for 12-month bills against Rs. 40 billion on offer, with the full Rs. 40 billion accepted at a WAYR of 9.91%, down 10 basis points from the previous auction.