T-bill yields continue to climb; 1-year yield adds 49bps to 11.15%

Yields at the weekly Treasury bill auctions continued to climb from three weeks ago with investors still inclined for the shortest tenor bond over the 1-year bill as they continue to expect that the yields have wider room to run their course even after the Central Bank delivered a 100 basis points hike two weeks ago. 

The benchmark 1-year bill yield added 49 basis points at the primary bill auction held yesterday to reach 11.15 percent bringing the cumulative increase in the yield to 262 basis points in the three weeks through yesterday. 

However, the subscriptions continued to remain woefully low for the longest tenor bill as investors favoured the shorter tenor bills as they expect the Monetary Board to deliver another 100 basis points hike in the coming Monetary Policy meeting scheduled for April 07. 

Meanwhile, all eyes at present are at the Federal Reserve of the United States as its  Federal Open Markets Committee is meeting on a crucial two-day policy meeting on March 15 and 16 and is widely expected to deliver a 25 basis points hike in federal funds rate setting off a series of rate hikes in the reminder of the year. 

The US is also battling a four-decade high inflation as its consumer prices climbed 7.9 percent form a year ago. 
The widely watched 10-year treasury yield was trading at 2.129 percent before the US market opened yesterday, adding 40.41 percent in basis points change since the start of the year as investors are looking for safe haven assets as the Russia-Ukraine conflict is making inflationary outlook murkier. 

The bond yields and prices are inversely related and when the yields climb, prices come down.
Meanwhile in Sri Lanka, prices rose 15.1 percent in the Colombo district in February, hitting a fresh 13-year high. The prices are expected spike in March in response to the floating of the rupee by the Central Bank last week.

Meanwhile at the primary bill auction held yesterday, the Central Bank issued bills worth Rs.60 billion in equal tranches under each tenor. The Central Bank accepted bills worth Rs.54.8 billion, and nearly all came through the 3-month bills. 

The 3-month bill yield added 106 basis points yesterday to 11.35 percent, while the 6-month bills added 57 basis points to reach 11.05 percent. 
Under 6-month and 1-year bills, the Central Bank only accepted Rs.20 and Rs.10 million, respectively.