T-bill yields top 24%; 1-year bills receive bids over 30%

Treasury bill yields inched atop 24 percent at the weekly bill auction held on Wednesday while the Central Bank rejected a section of the bids received for 6 and 12-month bills considering the wide range of bids, which were considered excessive.

The Public Debt Department (PDD) of the Central Bank offered Rs.92.5 billion in bills across the three maturities but accepted Rs.85.4 billion as dealers sought higher yields, specially for 6 and 12-month bills.

The 3-month bill yield added 59 basis points to 24.07, 6-month bills that rose by 84 basis points and the benchmark 12- month yield advanced 58 basis points after the yields retreated across all three tenors last week.

PDD offered Rs.46.5 billion under 3-month bills, but accepted Rs.66 billion. It further offered Rs.23 billion each under 6 and 12-month bills but ended up accepting only Rs.4.2 billion and Rs.15.1 billion respectively due to the aforesaid reason.

When the yields moderated in the last three auctions, there was a wide expectation for it to have peaked.

However, this week’s auction which came during curfew at a time when the country had been thrown into a complete political and social chaos since the violent incidents on Monday showed that yields have more room to run its course. This was indicated by the larger dispersion in the bids received for the 6 and 12-month bills, which ranged from 24.37 percent and 36.43 percent, and 24.95 percent and 37.25 percent respectively. Bank of Ceylon made the highest bids under the two tenors, which were seen as clear outliers from the rest of the auction participants.

Given the near term excessive economic uncertainty and the worsening foreign exchange crisis at present, it is extremely difficult to gauge whether the government securities yields have truly peaked.