Aug 02, 2017

CBSL conducts first Treasury bond auction under new system

The CBSL conducted its first Treasury Bond auction under the new issuance system on July 27th. The new transparent hybrid system draws on the strengths of a market based auction system, while accommodating the compulsions of having to raise Rs 1 trillion worth of bonds in a relatively thin market to meet the Government’s borrowing requirement in 2018.

The details of the new system were set out in the CBSL Press Release titled “ New Primary issuance System for Treasury Bonds”, dated July 25th, which is available on the Central Bank’s website.

Two maturities, i.e., 4 years 11 months and 9 years and 10 month were offered at the first auction to raise Rs. 22bn on a face value basis. The amount offered under each ISIN was fully subscribed in the 1st  phase itself at very favourable rates. The 4 years 11 months maturity was oversubscribed by 2.7 times while 9 years 10 months maturity was oversubscribed by 2.9 times. A favourable bidding pattern was observed with a minimum number of off market bids showing a high competitiveness at the auction. The weighted average yield rates dropped by 99 bps with respect to 4 years 11 months maturity and by 78 bps with respect to 9 years 10 months maturity when compared with the corresponding previous auctions held on May 9 and July 11 respectively for the two maturities.