T-bill yields continue to ease amid stability hopes

The Treasury bill yields continued to abate for the second consecutive week, signalling investor confidence over the country’s reform path taken to fix its decades-old fiscal imbalances with the support of the International Monetary Fund (IMF). 

The Central Bank also managed to sell the entirety of the Rs.65.0 billion it offered at the auction yesterday, with the bulk or Rs.55.4 billion being raised from the shortest three-month tenure. 

The three-month bill yield fell 76 basis points to 31.95 percent, six-month bill shed 19 basis points to 30.63 percent and the benchmark 12-month bill gave up 39 basis points to 29.87 percent, falling below the 30.0 percent level after weeks of being there. 

The last two auctions, which saw the Central Bank raising the total amount from the market with the back-to-back fall in yields, is an endorsement by bond investors of the commitment shown by the authorities to pursue tough reforms. 

After many decades, there are also some signs of bipartisanship over the reforms, which have already undertaken and the ones that are in the pipeline as part of the staff-level deal with the IMF for revenue-based fiscal consolidation and to cut SOE losses. 

Investors, both local and foreign, typically cheer such reforms as also seen from the net inflows from the latter to the government securities market as well as to the Colombo Stock Exchange (CSE). 

In the week ended on September 14, there was a sharp increase in the holdings of rupee bills and bonds by foreigners, which rose by 60.34 percent or Rs.2,982.12 million. 

This was the second consecutive week the foreigners added rupee treasuries into their holdings since the government announced its initial agreement with the IMF on September 1. 

Meanwhile, the CSE also for the first time in four years saw some Rs.10.0 billion worth of net foreign inflows from the beginning of the year through Tuesday, a milestone, which was also supported by the Rs.2.4 billion equivalent investment by Japan’s SG Holdings in Expolanka Holdings PLC, as part of its strategy to increase its holdings in the most valuable company, of which it has the largest stake.

This was the second consecutive week the foreigners added rupee treasuries into their holdings since the government announced its initial agreement with the IMF on September 1. 

Meanwhile, the CSE also for the first time in four years saw some Rs.10.0 billion worth of net foreign inflows from the beginning of the year through Tuesday, a milestone, which was also supported by the Rs.2.4 billion equivalent investment by Japan’s SG Holdings in Expolanka Holdings PLC, as part of its strategy to increase its holdings in the most valuable company, of which it has the largest stake.