G-Sec yields continue descent as economic recovery hopes grow ahead of IMF approval

The yields of government securities continued to ease this week as the Central Bank succeeded in selling Rs.120 billion at the Treasury bill auction held on Wednesday, two days after it offered a mammoth Rs.180 billion in the country’s biggest bond auction in its history. 

The bill auction saw the yields falling across the board extending the months-long streak of declines in yields on the hopes of finalising a deal with the International Monetary Fund on March 20.

This week’s primary bill auction saw the 3-month bill yields falling by 81 basis points to 27.94 percent, 6-month bill yields falling 43 basis points to 27.34 percent and 12-month bill yields falling 51 basis points to 25.92 percent.

With this week’s declines, the tenors had cumulatively given up 4.70 percent, 4.86 percent and 3.35 percent respectively, since the current streak of declines in bill yields began in the middle of December last year. 

The current descent in yields also reflects that the 100 basis points hike in key rates by the Central Bank a fortnight ago had no impact.

Despite the full subscription of the bill auction, the Central Bank kept open the second phase of the subscription for a further day to accept up to 25 percent of the aggregate amount offered at the auction. 

Meanwhile, the Central Bank on Monday offered Rs.180 billion in two bonds maturing on November 15, 2024 and May 01, 2027 at 22.00 percent and 18.00 percent respectively. 

Although Rs.70.0 billion was offered under the 2024 bond, the Central Bank accepted only a fraction or Rs.441 million at a weighted average yield of 29.99 percent reflecting that a majority of bids have landed well above the coupon rate. 

However, the Central Bank accepted the total Rs.110 billion it offered under the 2027 bonds at an average yield of 28.11 percent. The Central Bank managed to raise a further Rs.8.95 billion at an issuance window which kept open till the following day at the same average yield. 

The Central Bank raised further Rs.121.8 billion on Wednesday via a special issuance of Treasury bills as per the request of the Treasury to finance debt servicing payments.