Sri Lanka Treasuries yields up

Oct 31, 2012 (LBO) – Sri Lanka’s Treasuries yields rose across maturities at Wednesday’s auction with the 12-month yield rising as much as 08 basis points to 12.56 percent, data from the state debt office showed. The debt office which is a unit of the Central Bank has in the past printed money and repaid maturing bills, with the freshly minted notes rushing to commercial banks to be loaned out, in turn boomeranging on the island’s foreign exchange peg.

The 6-month yield rose 07 basis points to 11.97 percent. The 3-month yield rose 02 basis points from two weeks ago to 10.68 percent.

Last week all bids for three month bills were rejected. Treasury bill auction rejections in the past have been early signals that fiscal problems are worsening and can have the effect of dampening demand for longer tenor bonds, analysts say.

While some of the money that are available for investment in the week that bids are rejected flees the market for banks, the state usually borrows at much higher rates later, analysts say.