Treasury bill yields up 0.6%, above policy rates

October 18, 2006 (LBO) – Sri Lanka’s borrowing costs went up sharply by over 0.5 percent following Wednesday’s weekly treasury bill auction, prompting market speculation that the central bank may hike policy rates further, dealers said. Yields for three month treasuries were up 62 basis points to 11.87 percent, six months gained 60 basis points to 11.89 percent, while one-year paper rose 60 basis points to 11.96 percent, the central bank said.


Maturity

Bids received

Amount accepted

Weighted avg. yield

(Rs. mn)

(Rs. mn)

This week

Last week
Three months 8,660 4,338 11.87 11.25
Six months 4,199 260 11.89 11.29
One-year 4,421 583 11.96 11.36
Total

17,280

5,181

11.89

11.28
(Source:
Central Bank)

The bank offered 11.321 billion rupees worth of bills to the market, but bought back 6.140 billion rupees for its own stock.

Treasury bill yields have climbed up above 1.2 percent over the past one week, and now trade above central bank’s policy rates.

Central bank’s repurchase or repo rate now stands at 9.625 percent, while the reverse repurchase rate is kept at 11.125 percent. Over the last few months, the bank has raised policy rates by 87.5 basis points to curb credit demand and stamp out inflation.