Interest rates decline - CB
Interest rates in the Government Securities market have begun to
decline since the beginning of the year 2008, the Central Bank (CB) said
last week. At the primary Treasury Bill auction held on January 9
Weighted Average Yield Rates (WAYR) of 91 day bills has declined
significantly by 118 bps or 1.18 percentage points, while WAYR for 182
day and 364 day bills have declined by 20 bps each or 0.2 percentage
points when compared with the rates in the first week of January 2008, a
CB press release said.
CB said that this decrease was a result of the considerable buying
interest that prevailed in the market during the last week for T-bills
and T-bonds, because of more favourable investor expectations on
inflation as well as the prevailing liquidity position in the market.
At the last week primary auction CB re-issue of Rs. 14,758 million
maturing Treasury bills and the auction was well oversubscribed and
received bids amounting to Rs. 34,652 million. Rs. 6,126 million was
accepted from the market and the balance was retired.
WAYR for 91 days reduced to 20.12 from 21.30, for 182 days to 19.79
from 19.99 and for 364 days to 19.76 from 19.96. Total WAYR declined to
19.99 from 21.22.
According to the Department of Census and Statistics the
point-to-point inflation rate in December 2007 recorded 16.4%, lower by
3.2% compared to the previous month. However, the annual inflation rate
for the month (12 months moving average) was 17.5%, higher by 3.8
percentage points compared to the same period in 2006.
The Colombo Consumers Price Index (CCPI) for December was at 5954.9
index points, a 21.3 index point or 0.4% decrease from November 2007, a
decrease of Rs. 43.01 in the expenditure value of "Market Basket" when
compared to November 2007. In line with the declining pattern of
interest rates in the primary market, interest rates in the secondary
market too have shown signs of stabilisation since the beginning of
2008.
It is expected that this declining trend of the interest rate
structure in the market will be continued in line with falling inflation
expectations due to the tight monetary policy being pursued by the
Central Bank, and the recent public debt management strategies being
implemented. |