• Yields rise across all 3 maturities for 2nd consecutive week
• PDMO accepts entire stock on offer for 3rd straight auction
• Acceptance against a substantially enlarged offering of Rs. 100 b

Treasury bill (T-bill) yields continued their gradual upward correction at last week’s auction, rising across all three maturities for the second consecutive week, as the Public Debt Management Office (PDMO) accepted the entire stock on offer for the third straight auction, this time against a substantially enlarged offering of Rs. 100 billion.

Data published by the PDMO revealed that bids totalling Rs. 166.4 billion had been received at the auction held on Wednesday (1) against Rs. 100 billion on offer, with the PDMO accepting the full Rs. 100 billion.

The yield movement was modest but broad-based. The three-month T-bill rose by 9 basis points to a Weighted Average Yield Rate (WAYR) of 10.23%, the six-month by 9 basis points to 10.3%, and the 12-month by 3 basis points to 10.2%.

This modest yield movement, observed in the backdrop of the PDMO accepting bids for the entire stock on offer and the notable increase in volume from the Rs. 70 billion offered at each of the two preceding auctions, is indicative of the fact that market volatility appears to be retreating and the market is settling following the events of last month.

Last week’s movement coincided with a marked rise in inflation. According to the Daily Economic Indicators published by the Central Bank of Sri Lanka (CBSL), the year-on-year change in the Colombo Consumer Price Index (CCPI) rose to 6.8% in June this year, up sharply from 5.5% in May, while the National Consumer Price Index (NCPI) recorded a year-on-year change of 5.4% in May.

Market liquidity, meanwhile, showed further signs of easing. Overnight market liquidity stood at Rs. 82.56 billion as of 30 June, up from Rs. 61.62 billion on 26 June, marking a continued recovery from the acute liquidity shortage that had gripped the market through much of June.

At last week’s auction, bids worth Rs. 72.98 billion were accepted out of Rs. 90.51 billion received for three-month bills against Rs. 50 billion on offer at a WAYR of 10.23%, up 9 basis points from the previous auction.

Similarly, Rs. 19.06 billion was accepted out of Rs. 53.16 billion in bids for six-month bills against Rs. 35 billion on offer at a WAYR of 10.3%, up 9 basis points from the previous auction.

Meanwhile, Rs. 7.97 billion was accepted out of Rs. 22.72 billion in bids for 12-month bills against Rs. 15 billion on offer at a WAYR of 10.20%, up 3 basis points from the previous auction.