Benchmark 1-year bill yield continues to show downward stubbornness

The benchmark one-year Treasury bill yield extended its weeks-long downward stickiness at the weekly bill auction held yesterday. 
This is despite the assurances by the Central Bank that it would continue on its monetary easing cycle and enter into early resolutions with the private creditors to restore external debt sustainability, which remained as a long-time hangover, over a meaningful downward shift in the yield curve.
The Central Bank offered Rs.100.0 billion in bills across the three maturities, at its second weekly bill auction for the year, where it managed to raise the entire amount, although skewing towards the six-month and three-month tenures as usual.

The Central Bank offered Rs.30.0 billion under the three-month bills, Rs.40.0 billion under the six-month bills and another Rs.30.0 billion under the one-year bills.
But the acceptances were at Rs.37.90 billion, Rs.60.36 billion and Rs.1,736 million, under the three tenures, respectively. The yield of the three-month bill came off 18 basis points to settle at 14.27 percent while the six-month bill yield shed seven basis points to end at 14.09 percent.
However, the one-year bill yield remained unchanged at 12.93 percent from last week.
Yesterday marked the fourth consecutive weekly bill auction, where the benchmark one-year bill yield stood still, reflecting an enormous rigidity from coming off.

The Public Debt Department said it would keep the second phase of the subscriptions open till 4:00 p.m. today (January 11), to accept bids for the one-year bill, at the above-weighted average yield determined at the auction.
The aggregate eligible amount for subscription from the one-year bill would be 25 percent of the aggregate amount offered at the auction, it added. Presenting the monetary and financial sector policies for 2024 and beyond, the Central Bank said it would stay the course on the current easing monetary policy cycle. This is unless there is an unpredictable or exogenous event that could force it to change its direction, as medium-term inflation projections remain well anchored around 5 percent level, which is the Central Bank’s target level.
The Central Bank said it would continue its engagement with the external private sector creditors to enter into early deals to restructure their debt on comparable terms to that of the official creditors, which would help to ease any remaining uncertainties and help further downshift in the yield curve.
“An early resolution with the external private creditors on comparable terms would also contribute to the rapid dissipation of market uncertainties, thereby serving to bring down risk premia associated with government securities, leading to the desired downward shift of the yield curve,” the Central Bank added.