Strong demand for short-term T-bills, yield rates top 10% for all maturities

by Sanath Nanayakkare

Demand for short-term Treasury Bills (T-Bills) remained strong prompting the Central Bank to award its total offered amount of Rs. 60,000 million in full at the T-Bills auction held yesterday, according to the Public Debt Department.

The Central Bank was able to raise its full Rs. 60,000 million offer after attracting a hefty Rs. 79,439 million of bids for 91-day maturities against its offer of Rs. 20,000 million which was an over-subscription of the original amount by nearly four times. Out of it, the Central Bank opted to accept Rs. 59,375 million at a Weighted Average Yield Rate of 10.29%.

Meanwhile, the yield rates which is determined by market and economic conditions surpassed 10% for all T-Bills maturities.

However, when it came to 182-day T-Bills, the Central Bank opted to accept only Rs.300 million against its offer of Rs. 20,000 million, at a yield rate of 10.48%.

It adopted the same approach for 364-day Bills as it accepted only Rs. 325 million against its offer of Rs.20,000 million, at a yield rate of 10.66%.

At the last auction, T-Bills yield rate for 91 days, 182 days and 364 days were 9.33%, 9.88% and 9.95% respectively.

At the Monetary Policy Review press briefing held last week, the Central Bank said that although they observed bank lending rates and rates for government securities were adjusting upwards, adjustments in bank deposit rates remained sluggish.

In this context, the Central Bank urged banks and non-banking financial institutes (NBFIs) to offer attractive rates to depositors to promote savings while saying that the Central Bank expected inflationary pressures to remain elevated in the near term.