Treasury bill auction bucks trend in a temporary blip in yields

The weeks-long decline in Treasury bill yields reversed this week in two out of three tenures, in what was interpreted as a temporary blip by the primary dealers and investors, as they believe the current descent in bill and bond yields to accelerate in the remainder of the year.

The three-month bill yield rose 68 basis points on Wednesday to settle at 24.80 percent, after slumping 187 basis points last week. 

Meanwhile, the yield of the six-month bills remained unchanged at 24.10 percent while the benchmark 12-month bill yield rose 27 basis points to end at 22.64 percent.

The Central Bank on Wednesday offered Rs.120.0 billion in bills in its weekly bill auction brought forward due to the long holidays coming up towards the end of the week, in lieu of the traditional Sinhala and Tamil New Year celebrations. 

The Central Bank sold only Rs.99.9 billion worth bills and left open Phase II of the auction to sell a further up to 25 percent of the aggregate amount offered at Phase I of the auction. 

The yields follow the disinflation path as well as the successful end to the final board approval for the International Monetary Fund (IMF) programme, which unlocked nearly US $ 3.0 billion funds through four years.  

The investors across equities and fixed incomes were further reassured by the comments came from the local officials a fortnight ago that they would safeguard the local banking system stability under whatever the form of domestic debt restructuring.

Former Central Bank Governor Dr. Indrajith Coomaraswamy last week said that he is confident that both domestic and foreign debt would be restructured by the end of June, when the officials are required to lodge the data with the IMF for the first review coming up in September.