T-bill yields see spike; 3-month rise most

Despite the 2 percent policy rate cut last Thursday, the Treasury bill yields experienced a rebound at yesterday’s auction, after a significant drop in response to the parliamentary approval for the Domestic Debt Optimisation (DDO) programme the previous week.

The three-month bill yields rose 129 basis points from the last auction to 19.08 percent, while the six-month yields rose 102 basis points to 16.95 percent. The 12-month bill yields rose the least by 18 basis points to 14.04 percent.

The Public Debt Department of the Central Bank raised only Rs.99.6 billion on behalf of the Treasury, despite offering bills worth of Rs.160 billion, in the manner of Rs.70 billion in three-month bills and Rs.45 billion each in six-month and 12-month bills.

However, only Rs.52 billion was raised via three-month bills, Rs.30.9 billion via six-month bills and Rs.16.6 billion via 12-month bills. 

According to analysts, the spike in yields could have been caused by the lower demand for T-bills amid the fall in interest rates and the Treasury bond auction that is scheduled for tomorrow.

The Central Bank is set to hold a T-bond auction after 122 days tomorrow and the investors may have skipped the bill auction to save funds to purchase bonds, which are considered long-term investments. Long-term investments make more sense in an environment where interest rates continue to decline.