Sri Lanka rejects bids at Treasuries auction

Feb 11, 2010 (LBO) – Sri Lanka has rejected all bids at the Treasuries auction Wednesday which offered to roll over 10.5 billion rupees of maturing, bills the government’s debt office said. The central bank also mopped up 3.6 billion rupees through a central bank securities auction where 10 billion was originally released.

Such rejections in the past have coincided with severe cash shortages in the government or foreign reserve outflows that drained liquidity from the domestic monetary system.

The Treasuries stock held by the monetary authority fell around 40 billion Wednesday from 47 billion rupees rupees a day earlier, while excess reserves in the system also increased to 17 billion rupees.

Analysts say this indicates the release of liquidity to the market either from maturing central bank securities or swaps.