Sri Lanka’s call rates, touched 9.38 per cent in late trading on Tuesday, despite massive excess liquidity in the system, traders said

Sri Lanka’s call rates, touched 9.38 per cent in late trading on Tuesday, despite massive excess liquidity in the system, traders said. Sri Lanka’s call rates, touched 9.38 per cent in late trading on Tuesday, despite massive excess liquidity in the system, traders said. Central Bank’s policy rate is 9.00 per cent, but some banks have been forced to borrow in the interbank market at rates higher than the Central Banks policy rates, because they no longer have bills to back such borrowings.

Central Bank’s reverse repo rate is 9.00 per cent, and market repo rates are around 8.25 to 8.50 but lack of bills is forcing some participants to borrow clean, at higher rates.

Traders say Central Bank took in about Rs 14 bn at 7.88 at the open market auction on Tuesday, with Citibank also parking the IOC money there.

At the moment Central Bank holds more than Rs. 70 bn of the Rs. 240 bn t-bill issued, while most of the rest are held by captive funds.

After SLT re-paid a US$ 50 mn loan to government, Central Bank bought the dollars injecting liquidity.

Central Bank had also deliberately kept the market liquid anticipating a seasonal draw down of cash resulting in higher than anticipated excess liquidity.

With the flow of foreign exchange flow becoming positive for a while, the Department of Public Debt is offering almost the entire Rs 6.7 bn issue to the market at the upcoming t-bill auction on Wednesday, departing from the usual trend of buying up large volumes of government debt.

-LBO Newsdesk: LBOEmail@vanguardlanka.com