would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc.. 
Home
Rupee continues to strengthen, T-bill rates increase
* CB absorbs Rs. 124.6bn in eight days to contain credit growth and shield balance of payments
The rupee continued to gain against the dollar yesterday on improved inflows and subdued importer demand, currency dealers said, while the Central Bank mops up excess liquidity to prevent loans from being generated at lower rates which could hurt the balance of payments if these loans fuelled import demand further.
The rupee strengthened for the second consecutive day closing at Rs. 129.25/40 against the greenback from an opening position of Rs. 129.80/130.00.
"Importer demand is subdued as many of them have completed their seasonal bookings. Exporters are converting their dollars to meet commitments such as salaries and bonuses for the Sinhala and Tamil New Year next month. Remittances are also buoyant," a currency dealer said.
Meanwhile, benchmark Treasury bill yields increased across all tenures at yesterday’s primary market auction.
The three months bill saw its yield increase to 11 percent from 10.75 percent a week earlier, while the 12-months bill increased to 11.32 percent from 11.11 percent. The six months bill saw its yield increase to 11.06 percent after bids for this category were rejected the previous week.
The auction was held for maturing bills amounting to Rs. 10 billion. Bids amounted to Rs. 24.3 billion but only Rs. 6.035 billion was accepted by the Public Debt Department of the Central Bank.
"Yields rose in response to the Central Bank’s policy of containing credit growth via higher lending rates, at the same time, the rejection of a majority of bids is an indication that it does not want rates to spiral," a currency dealer said.
Overnight interbank borrowing rates remained flat after easing in recent days from near two year highs.
The overnight call market rate for interbank borrowings without security moved to 9.20 percent from 9.18 percent the previous day. The market repo rate for interbank borrowings backed by security was unchanged at 8.30 percent while the overnight Sri Lanka Inter Bank Offered Rate eased marginally to 9.30 percent from 9.33 percent.
The Central Bank conducted a repo auction outside the policy window to absorb Rs. 14.3 billion from the banking system. It has absorbed a total of Rs. 124.6 billion since March 19. The Central Bank used to conduct these auctions when it was absorbing the dollar inflows into reserves from 2009 to mid 2011 so as to mop up the excess rupee liquidity caused by the dollar purchases.
However, from mid 2011 to about February 2012, the bank injected around Rs. 300 billion through reverse repo auctions outside the policy window to make up for the loss of rupee liquidity caused by its dollar sales in defending the exchange rate.
Currency dealers said the repo auctions were conducted to absorb excess rupee liquidity positions of a handful of banks in order to contain credit growth.
"These excess funds could be used to generate loans which could create import demand and attack the balance of payments once again, so the Central Bank is using the auctions to mop up this access liquidity," a dealer said.
Dealers said recent policy measures to contain credit growth were showing signs of bearing fruit, but with credit demand down, banks with excess rupee positions maybe tempted to lend at lower rates.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=48518
* CB absorbs Rs. 124.6bn in eight days to contain credit growth and shield balance of payments
The rupee continued to gain against the dollar yesterday on improved inflows and subdued importer demand, currency dealers said, while the Central Bank mops up excess liquidity to prevent loans from being generated at lower rates which could hurt the balance of payments if these loans fuelled import demand further.
The rupee strengthened for the second consecutive day closing at Rs. 129.25/40 against the greenback from an opening position of Rs. 129.80/130.00.
"Importer demand is subdued as many of them have completed their seasonal bookings. Exporters are converting their dollars to meet commitments such as salaries and bonuses for the Sinhala and Tamil New Year next month. Remittances are also buoyant," a currency dealer said.
Meanwhile, benchmark Treasury bill yields increased across all tenures at yesterday’s primary market auction.
The three months bill saw its yield increase to 11 percent from 10.75 percent a week earlier, while the 12-months bill increased to 11.32 percent from 11.11 percent. The six months bill saw its yield increase to 11.06 percent after bids for this category were rejected the previous week.
The auction was held for maturing bills amounting to Rs. 10 billion. Bids amounted to Rs. 24.3 billion but only Rs. 6.035 billion was accepted by the Public Debt Department of the Central Bank.
"Yields rose in response to the Central Bank’s policy of containing credit growth via higher lending rates, at the same time, the rejection of a majority of bids is an indication that it does not want rates to spiral," a currency dealer said.
Overnight interbank borrowing rates remained flat after easing in recent days from near two year highs.
The overnight call market rate for interbank borrowings without security moved to 9.20 percent from 9.18 percent the previous day. The market repo rate for interbank borrowings backed by security was unchanged at 8.30 percent while the overnight Sri Lanka Inter Bank Offered Rate eased marginally to 9.30 percent from 9.33 percent.
The Central Bank conducted a repo auction outside the policy window to absorb Rs. 14.3 billion from the banking system. It has absorbed a total of Rs. 124.6 billion since March 19. The Central Bank used to conduct these auctions when it was absorbing the dollar inflows into reserves from 2009 to mid 2011 so as to mop up the excess rupee liquidity caused by the dollar purchases.
However, from mid 2011 to about February 2012, the bank injected around Rs. 300 billion through reverse repo auctions outside the policy window to make up for the loss of rupee liquidity caused by its dollar sales in defending the exchange rate.
Currency dealers said the repo auctions were conducted to absorb excess rupee liquidity positions of a handful of banks in order to contain credit growth.
"These excess funds could be used to generate loans which could create import demand and attack the balance of payments once again, so the Central Bank is using the auctions to mop up this access liquidity," a dealer said.
Dealers said recent policy measures to contain credit growth were showing signs of bearing fruit, but with credit demand down, banks with excess rupee positions maybe tempted to lend at lower rates.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=48518
