• PDMO accepts entire stock on offer for 4th straight auction 
• Bids totalling Rs. 229.8 b received at auction 

Treasury bill (T-bill) yields showed signs of stabilising at last week’s auction, with movement across the three maturities largely flat, as the Public Debt Management Office (PDMO) accepted the entire stock on offer for the fourth consecutive auction amid robust investor demand.

Data published by the PDMO revealed that bids totalling Rs. 229.8 billion were received at the auction held on Wednesday (8) against Rs. 100 billion on offer, with the PDMO accepting the full Rs. 100 billion.

The volume of bids received at last week’s auction marked a substantial increase over the Rs. 166.4 billion received at the previous auction, reflecting strengthening appetite for Government securities amidst improved liquidity in the market.

According to the Daily Economic Indicators published by the Central Bank of Sri Lanka (CBSL), overnight market liquidity stood at Rs. 134.77 billion as of Tuesday (7), up from Rs. 132.29 billion the previous day, marking a substantial recovery from the acute liquidity shortage that had prevailed through much of June when the figure had fallen to as low as Rs. 40.1 billion.

The yield movement at last week’s auction was marginal and mixed, in contrast to the steady upward drift seen over the preceding two weeks. 

The three-month T-bill eased by 2 basis points to a Weighted Average Yield Rate (WAYR) of 10.21%, while the 12-month rose by 1 basis point to 10.21%. The six-month T-bill held steady at 10.30%, unchanged from the previous auction.

The flattening of yields suggests the market may be settling following the volatility that had gripped it since the CBSL’s 100-basis-point policy rate hike in May.

Yields surged in the immediate aftermath of that hike before declining in mid-June and then edging higher over the two subsequent weeks in what analysts described as a technical correction, with last week’s near-flat outcome pointing to the market achieving a degree of equilibrium.

At last week’s auction, bids worth Rs. 58.47 billion were accepted out of Rs. 136.19 billion received for three-month bills against Rs. 50 billion on offer at a WAYR of 10.21%, down 2 basis points from the previous auction.

Similarly, Rs. 35 billion was accepted out of Rs. 73.88 billion in bids for six-month bills against Rs. 35 billion on offer at a WAYR of 10.3%, unchanged from the previous auction.

Meanwhile, Rs. 6.53 billion was accepted out of Rs. 19.76 billion in bids for 12-month bills against Rs. 15 billion on offer at a WAYR of 10.21%, up 1 basis point from the previous auction.

– By Shenal Fernando