Sri Lanka three month t-bill rates ease amidst excess liquidity

May 09, 2007 (LBO) – The Sri Lanka Treasury bill auction rates eased with the key three month weighed average slipping 4 basis points to 16.52 percent at Wednesday’s auction. The six month weighted average yield slipped 3 basis points to 16.33 percent while the one year fell 4 basis points to 16.15.

Meanwhile the rupee steadied at around 110.85 to the dollar.

The Central Bank has however started making a slight dent in the record 22 billion rupee excess liquidity stock selling 1.6 billion rupees through a short term auction at 15.90 percent.

Today’s excess liquidity was 20.5 billion rupees.

The bank previously rejected two auctions because bids were coming in at high rates despite the excess liquidity.

The three month t-bill rate has become an alternative ‘signal rate’ of the central bank to the market and an easing of auction rates, together with two short term auction rejections is viewed by some market participants as an effort by the monetary authority to put a cap on rate rises.

Today’s auction rates are being viewed by some market participants as further indications that the central bank may be ready to push rates down.

With the off