• 3-month T-bill drops below 9% for first time in current cycle
• Rs. 203.3 b in bids received against Rs. 80 b on offer
• Auction oversubscribed by 2.54 times

Treasury bill (T-bill) yields continued to fall at last week’s auction, with the three-month T-bill dropping below 9% for the first time in the current cycle.

Data published by the Public Debt Management Office (PDMO) revealed that bids totalling Rs. 203.3 billion had been received at the auction held on Wednesday (2) against Rs. 80 billion on offer, with the PDMO accepting the full Rs. 80 billion, leaving the auction oversubscribed by 2.54 times. 

The offering at last week’s T-bill auction was reduced from the Rs. 120 billion offered at the previous auction, while demand for Government securities remained firm.

The three-month T-bill eased by 10 basis points to a Weighted Average Yield Rate (WAYR) of 8.96%, the six-month by 17 basis points to 9.27%, and the 12-month by 8 basis points to 9.81%.

The decline marked an eighth consecutive week of easing, with the three-month rate slipping below the 9% mark for the first time in the current cycle and all three maturities remaining well below 10%.

The continued easing came even as inflation accelerated. 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) rose to 8% in August, up from 7.3% in July.

The Average Weighted Prime Lending Rate (AWPR) rose to 10.95% last week, from 10.86% a week earlier.

Overnight market liquidity stood at Rs. 122.05 billion as of 2 September, down from Rs. 138.76 billion the previous business day, and broadly in line with the Rs. 123.21 billion recorded a week earlier on 24 August. 

Liquidity remained 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. 62.27 billion were received for three-month bills against Rs. 35 billion on offer, with the full Rs. 35 billion accepted at a WAYR of 8.96%, down 10 basis points from the previous auction.

Similarly, Rs. 62.94 billion in bids was received for six-month bills against Rs. 25 billion on offer, with the full Rs. 25 billion accepted at a WAYR of 9.27%, down 17 basis points from the previous auction.

Meanwhile, Rs. 78.10 billion in bids was received for 12-month bills against Rs. 20 billion on offer, with the full Rs. 20 billion accepted at a WAYR of 9.81%, down 8 basis points from the previous auction.