Treasury bill yields ease as Parliament elects new President

The Treasury bill yields edged lower yesterday after three weeks of climbing but ended way above when the current ascent in the short-term bills began on June 29, in response to the rising funding needs of the government amid the tightening liquidity conditions in the rupee markets. 

The bill yields fell in a broader range of five basis points to 104 basis points across all three tenures while the Public Debt Department accepted the entire amount it offered in a departure from the last few auctions, where it rejected some of the bids that came well above its desired levels. 

Central Bank Governor Dr. Nandalal Weerasinghe called the spike in the yields an “overshooting”, a term which he had been using since the latter part of April when the bill yields started rising continuously after the jumbo policy rate hike delivered on April 08. 

However, Dr. Weerasinghe a fortnight ago said the yields should ease when the uncertainties were settled.
It is immediately not clear whether election of Ranil Wickremesinghe as the eighth Executive President yesterday by a larger margin has anything to do with the ease in the yields but the equities rose in the last couple of sessions on hopes for relative political stability after the selection of a new president.

The three-month bill yield fell 61 basis points to settle at 31.50 percent, the six-month bill yield shed 104 basis points to end at 29.97 and the benchmark 12-month yield slipped five basis points to remain at 29.82 percent. 

The Public Debt Department offered Rs.55.0 billion-Rs.25.0 billion under three-months and Rs.15 billion each under six and 12-month bills. 

As usual, the bulk or Rs.45.3 billion was raised from three-month bills, Rs.230 million from six-month bills and Rs.9.5 billion from 12-month bills. 

As seen recently, the Central Bank will keep open the direct issuance window for the six-month and 12-month bills until 3:30 p.m. today to accept up to further 25 percent from the aggregate amount offered at the auction. 

This window is intended to give an opportunity for the mom-and-pop investors, who may not be able to enjoy the full benefit of the auction yields in the secondary market.