Central Bank removes maximum acceptable rate for T-bills

The Central Bank (CB) has removed the maximum acceptable rate (364-day T-bills) at the T-bill auction after one year, as it was not successful in attracting bids for the auction, due to this restriction.

“The possible subscription of T-bills going forward with this removal, would likely restrict the excessive money printing in our view, which otherwise contributed largely towards growing inflation, forex depletion and reserve losses,” National Lanka Equities said in a brief research note, yesterday.

“The interest rates of the country are likely to pick up as it was visible when looking at the AWPLR, which already increased by 60-74bps to 6.4 percent since the tightening of monetary policy in August 2021,” the research note said.

“The real interest rates however could remain less attractive in our view, despite rising interest rates, with likely increase in inflation (due to demand and possible supply shortages) offsetting the real returns. Equity markets should thus remain positive in our view, with returns still remaining higher than the real interest rates,” it added.