Sri Lanka treasury yields up 10bp to 17.65%

August 29, 2007 (LBO) – Sri Lanka’s 3-month t-bill average yields edged up 10 basis points to 17.65 percent at Wednesday’s auction with cut-off rates touching 17.80 percent, the government’s debt office and dealers said. Sri Lanka’s rupee has also come under pressure since May and dropped below 113 to the dollar on Wednesday. The government raised 8.5 billion rupees from the market and retired 2.2 billion worth of bills.

Three month maturities brought in 7.4 billion rupees. Six month bills brought in 870 million at an average yield of 17.12 percent and 12-month bills brought just 196 million at an average yield of 16.89 percent, both of which were unchanged from last week.

Sri Lanka’s treasury rates have started to rise in the past two weeks after the central bank stayed away from auctions amidst rising government expenditure.

Economic analysts have blamed a provision in Sri Lanka’s monetary law that allows the country’s central bank to intervene in primary treasury markets for contributing to severe economic instability in the country during the past five decades.