• 3-month rate falls to 9.86%
• PDMO accepts entire stock on offer for 7th consecutive auction
• Market liquidity improves

Treasury bill (T-bill) yields eased further at last week’s auction, with the three-month rate falling below the 10% level to 9.86% as the Public Debt Management Office (PDMO) accepted the entire stock on offer for the seventh consecutive auction amidst improved liquidity in the market.

Data published by the PDMO revealed that bids totalling Rs. 293.1 billion had been received at the auction held on Tuesday (28 July) against Rs. 140 billion on offer, with the PDMO accepting the full Rs. 140 billion.

However, the volume of bids received at last week’s auction marked a decline from the Rs. 368.9 billion received at the previous auction, although it remained robust at more than double the amount on offer.

The three-month T-bill eased by 9 basis points to a Weighted Average Yield Rate (WAYR) of 9.86%, while the six-month eased by 3 basis points to 10.21%. The 12-month held steady at a WAYR of 10.2%, unchanged from the previous auction.

The decline extended the downward drift seen over the preceding weeks, with the three-month rate falling for a third consecutive week to move further below the 10% mark, even as the six-month and 12-month yields converged around 10.2%.

According to the Daily Economic Indicators published by the Central Bank of Sri Lanka (CBSL), overnight market liquidity stood at Rs. 153.8 billion as of 27 July, up from Rs. 148.13 billion on 21 July, and 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. 148.46 billion were received for three-month bills against Rs. 60 billion on offer with Rs. 71.94 billion accepted at a WAYR of 9.86%, down 9 basis points from the previous auction.

Similarly, Rs. 99.24 billion in bids was received for six-month bills against Rs. 50 billion on offer with the full Rs. 50 billion accepted at a WAYR of 10.21%, down 3 basis points from the previous auction.

Meanwhile, Rs. 45.4 billion in bids was received for 12-month bills against Rs. 30 billion on offer with Rs. 18.07 billion accepted at a WAYR of 10.2%, unchanged from the previous auction.

As in the previous auctions, the PDMO skewed its acceptances towards the three-month maturity, accepting Rs. 71.94 billion against the Rs. 60 billion offered, while accepting well below the offered amount for the 12-month maturity.