T-bill yields continue their downward descent

The Treasury bill yields declined at the weekly auction held yesterday, continuing their weeks-long descent, although the prospects of an early economic recovery on the back of easing monetary policy remain elusive.

The three-month bill yield shed 86 basis points to settle at 31.15 percent, despite signs of fresh challenges, particularly with the expected contraction in the first quarter of this year. 

Although inflation has shown signs of abating, prices are still rising at near 60 percent levels, eroding the real incomes of households and squeezing margins of businesses.  

The Public Debt Department yesterday sold Rs.88.0 billion in bills across the three maturities—Rs.50 billion in three-month bills, Rs.20 billion in six-month bills and Rs.18 billion in 12-month bills. 

The six-month bill yield fell 65 basis points to 31.37 percent while the benchmark 12-month yield slid 12 basis points to settle at 29.04 percent, adding to the continuous declines seen in the yields in the previous many weeks. 

The acceptance mirrored the offered amounts respectively under the three tenures.
The Central Bank last week said that the risk premia attached to domestic debt restructuring concerns were assuaging and thus the interest rates should moderate along with the improvement seen in the money market liquidity.   

The banks reject debt restructuring – both foreign and domestic debt, which involves a haircut, as it leads to severe capital deficiency issues, which could destabilise the banking sector, prolonging any prospect of economic recovery.