- Bids totalling Rs. 172.3 b received against Rs. 140 b on offer
- PDMO accepted bids for only Rs. 95.6 b, 32% unsold
The Public Debt Management Office (PDMO) managed to sell only around 68% of its Treasury bills (T-bills) offered at the auction on Tuesday (26) despite permitting yields to surge by over 100 basis points across the board.
According to data published by the PDMO, bids totalling Rs. 172.3 billion were received against Rs. 140 billion on offer. However, the PDMO accepted bids for only Rs. 95.6 billion, leaving around 32% of the offered stock unsold.
The scale of the yield movement was striking. The three-month T-bill rose by 118 basis points, the six-month by 143 basis points, and the 12-month by 134 basis points, clearly indicating that the PDMO had set its cut-off rates significantly above the 100 basis point increase in policy rates introduced earlier that same day. Yet even that concession to the market was insufficient to clear the full auction.
Market sources have pointed out that a likely explanation for the lacklustre demand at the T-bill auction was the Rs. 240 billion Treasury bond auction scheduled for the following day (27), which may have prompted investors to hold back.
Ceylinco Life Insurance Ltd. Head of Investment Gayan Lakmal Alwis pointed out on his X handle that despite failing to sell the entire T-bill stock on offer, the PDMO had in fact accepted Rs. 71.2 billion worth of bids for the three-month T-bill despite initially offering only Rs. 65 billion at the auction.
“It’s likely that they wanted to accept what they could at the least possible cost, since the 182- and 364-day maturities were even more expensive,” he stated.
At the T-bill auction, bids worth Rs. 71.2 billion were accepted out of Rs. 96.5 billion in bids received for three-month bills at a Weighted Average Yield Rate (WAYR) of 9.36%, up by 118 basis points from the previous auction.
Similarly, Rs. 14.4 billion was accepted out of Rs. 45.3 billion in bids for six-month bills at a WAYR of 8.68%, up by 143 basis points from the previous auction.
Meanwhile, Rs. 9.9 billion was accepted out of Rs. 30.6 billion in bids for 12-month bills at a WAYR of 9.83%, up by 134 basis points from the previous auction.