ECONOMYNEXT – Sri Lanka’s Treasuries yields rose across maturities at Wednesday’s auction with the 3-month yield up 75 basis points to12.10 percent, data from the state debt office showed as the effects of two years of money printing began to be felt by the country.

The debt office offered 56 billion rupees of bills and sold 54.8 billion rupees in 3-month bills.

The 6-month yield went up 93 basis points to 11.98 percent, with 503 million rupees being sold.

The 12-month yield went up 85 basis points with 1,165 million rupees being raised.

Sri Lanka is facing a severe currency crisis due to money printed through crippled bond auctions to keep interest rates down, undermining an exchange rate peg.

The rupee has now fallen to around 285 to the US dollar from around 185 when money printing began and interest rates are also rising.

Analysts call the phenomenon, “rawulath ne kendeth ne” based on a folk saying, or that neither the soup (exchange rate) nor the beard (interest rate) were saved by artificially keeping interest rates down. (Colombo/Mar22/2022)