Yields fell across all three tenors at this week’s Treasury bill auction, even as secondary market bond yields held steady
Yields at this week’s Treasury bill auction eased across all three tenors, with the steepest decline recorded on the 182-day bill, which fell 22 basis points.
According to auction results for the period settling this week, the 91-day bill was accepted at a yield of 9.77%, down 9 basis points from the previous auction. The 182-day bill cleared at 9.99%, a decline of 22 basis points, while the 364-day bill eased marginally to 10.19%, down 1 basis point.
The move in short-term yields stands apart from conditions in the secondary bond market, where yields across the curve were largely unchanged from the prior session. Bonds maturing between 2028 and 2037 traded within familiar ranges, with the shorter end of the curve changing hands between 10.45% and 10.50%, and longer-dated maturities trading up toward 12.67% at the very long end. The relative stability in secondary market pricing suggests the auction-driven decline in short-term yields has not yet fed through to broader market pricing.
The yield movements came alongside a notable expansion in banking system liquidity, with overnight liquidity rising to LKR 218.0 billion from LKR 165.38 billion in the prior session. Foreign holdings of Sri Lankan government securities also rose, increasing 3.53% week-on-week.
Business Impact
A decline in short-term Treasury bill yields, particularly the 22 basis point drop on the 182-day tenor, points to potentially lower short-term government borrowing costs and can be an early signal for businesses and financial institutions that price short-tenor instruments off these benchmarks. However, with secondary market bond yields holding firm, businesses should not read this as confirmation of a broader shift in the interest rate environment. The expansion in system liquidity may be a contributing factor to the auction results and is worth monitoring in coming sessions.
Key Numbers
| Metric | Value |
|---|---|
| 91-day T-bill yield | 9.77% (-9 bps) |
| 182-day T-bill yield | 9.99% (-22 bps) |
| 364-day T-bill yield | 10.19% (-1 bp) |
| Secondary market bond yields | Broadly unchanged |
| Overnight liquidity | LKR 218.0 Bn (from LKR 165.38 Bn) |
| Foreign holding of govt securities (WoW) | +3.53% |
Source Attribution
Source: Central Bank of Sri Lanka statistics and publicly available market information.