The three month yield fell 15 basis points to 10.86 percent and the 6-month yield fell 17 basis points to 12.12 percent. But the 12-month yield edged up 6 basis points to 12.66 percent, data released by the state debt office, a unit of the Central Bank showed.
Soon after the auction, in secondary market 3-month yield fell further to be quoted around 10.70/80 percent and the 6-month down to 11.90/12.00 percent, dealers said. The one year was quoted around 12.60/75 percent
The state sold 5.3 billion rupees of 3-month bills, 10.3 billion rupees of 6-month bills and 4.7 billion rupees of 12-month bills.
Sri Lanka's central bank heavily controlled Treasury bill yields up to March 2012 with printed money triggering a balance of payments crisis and which send the rupee plunging to 130 rupees from 110 to the US dollar.
Treasuries yield were allowed for float after March. When interest rates float, an exchange rate can be kept stable or fixed. A pure interest rate float, create conditions for a so-called currency board or hard pegged exchange rate.
Analysts have urged the central bank to allow interest rates to float and refrain from purchasing Treasury bills with printed money so that the exchange rate can be fixed and inflation can be kept low.
Inflation and currency depreciation which destroys the real value of salaries and accumulated savings of old people in particular is one of the most effective tools of generating poverty devised by rulers.
Before the advent of paper money and central banking, rulers debased money by mixing precious metals with cheaper metals such as copper or minting smaller coins.