Treasury yields ease for third consecutive week

The yields in the Treasury bills across the tenures eased somewhat at the auction held yesterday after two weeks of moderating.

It appears that the yields have peaked for now following the sharp correction that took place on April 11, soon after the policy rates were jacked up by unprecedented 700 basis points on April 8. 
However, a section of dealers and bond investors still are of the opinion that the current run in the bond yields isn’t done yet. 

The last three auctions since April 11 were an indication that the yields might have peaked although there is no guarantee that the easing trend would continue, as April inflation reached 30 percent, the highest since the Colombo Consumer Price Index began compiling price data. 

Meanwhile, Finance Minister Ali Sabry yesterday in Parliament said that Sri Lanka is still at the beginning of its foreign exchange crisis and things could get worse in the next two months before it would have any semblance of stabilising. 

According to him, Sri Lanka has money only till the end of June to import fuel under the Indian line of credit worth US $ 500 million.  The auction results showed the three-month bills shedding five basis points to end at 23.48 percent and the six-month yields followed shedding 11 basis points to settle at 23.85 percent. 

The benchmark one-year bill yields retreated 17 basis points from last week to end at 23.92 percent. 
The Central Bank offered Rs.97.5 billion in bills yesterday and the auction saw a full subscription with a slight improvement in the amounts accepted in terms of one-year bills.  A bulk or Rs.74.1 billion was still allocated to three-month bills while the six-month bills were allocated with Rs.9.6 billion.  The Public Debt Department accepted Rs.13.9 billion under one-year bills, making up the total amount offered yesterday.  There is a widespread interest in Treasury bills in the market, where even the bank deposit holders are seen transferring their funds into bills in pursuit of higher returns to beat inflation.