Three-month T-Bills Held back Again CB Curbs Govt’s Borrowing Costs

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By 2017-08-12

Government of Sri Lanka (GoSL) in a bid to create a market appetite for its borrowings and therewith bring such borrowing costs down, is not offering its three-month (91-day) Treasury T-Bill tenure after a lapse of 14 weeks at its weekly T Bill issue to be held next week.

Issuing of T-Bills to the market is one way GoSL raises funds to meet its monetary commitments. But GoSL's commitments on interest payments alone on borrowings increased by 24% to Rs 243,499 million during the first four months of the year (2017) compared to Rs. 196,676 million in the same period of 2016, latest Finance Ministry data showed. As a result, at Wednesday's (16 August) weekly T-Bill auction, GoSL is offering only the six months (182 day) and one-year (364 day) tenures to the market. It plans to raise a total of Rs 28 billion at this auction. Those comprise only the issuance of Rs 15 billion in six-month T-Bills and Rs 13 billion in benchmark one year T-Bills respectively.

The last date on which the Central Bank did not issue the three-month tenure to the market was at the weekly auction of 8 May.

Meanwhile, the weighted average yield (WAY-interest cost) of the three months' tenure which, since the beginning of this year rose by 1.01 percentage points to 9.73% by 19 April due to the tight liquidity situation prevailing in the market then, had by the time of this week (i.e. in the weekly auction held on 9 August) come down by 0.86 percentage point to 8.87% due to net foreign inflows led by the government securities market (T-Bills and T-Bonds).

Similarly, the six-month tenure bills which WAY rose by 1.16 percentage points since the beginning of this year to 10.79% by 19 April, had, by this week fallen by 1.77 percentage points to 9.02%, while that of the one- year tenure which by 19 April had increased by 0.94 percentage points to 11.11%, has since come down by 1.72 percentage points to 9.38%.

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