Sri Lanka: Movement of Treasury Bill Rates during 2023

DeepFreakingValue

DeepFreakingValue

Manager - Equity Analytics

Posts : 217
Equity Stars : 5727
Reputation : 8
Join date : 2010-05-08

Sri Lanka: Movement of Treasury Bill Rates during 2023 Scree355

As given above Government Treasury Bill Rates have fallen from high of 32% p.a to 18% from January to August 2023. How much more can TB Rates fall? How will it impact Banks and Treasury Bond Companies like CALT/CFVF/FCT? Can they maintain the same earnings growth in coming Quarters?

Future Outlook does not look all that promising. Why?

TB rates went upto 32% p.a due to economic crisis. These Bond Companies only make profits when TB/Interest Rates come down from the High. TB rates have already fallen from 32% to 18%. As a result these companies made a super profits which is hard to sustain in the future.

If these Companies are to make same Profits next quarter interest rates will have to fall from 18% to 2% p.a. This is very unlikely to happen. Therefore the profits made by these companies are not sustainable. Valuing these companies on the straight line earnings is improper and incorrect.

Profits of these Bond companies are cyclical. Eg: Like Tsunami or Covid 19 Pandemic which cannot be predicted with any certainty.

September Quarter Forecast

Sri Lanka: Movement of Treasury Bill Rates during 2023 Scree356

Find Above, Treasury Bill (TB) Movement of the July - Aug 2023 quarter to-date. Hardly any significant fall so far, therefore next quarter Earnings of the bond companies expected to be lower.

Sri Lanka: Movement of Treasury Bill Rates during 2023 Scree164

https://www.cbsl.lk/eResearch/Modules/RD/SearchPages/Indicators_GovernmentSecurities.aspx

Tue Sep 19, 2023 3:07 pm by **God Father** · Tue Sep 19, 2023 3:07 pm by **God Father**

Sri Lanka: Restriction on money printing likely to have a significant future impact on the interest rates and yield on Treasury Bills and Bonds. GOSL will now be required to borrow directly from the open market in order to pay the maturing TB/bonds. As a precaution GOSL raised nearly 160 bn in Bonds just prior to the implementation of the new legislation on 15th September 2023.

New CBSL Act effective from today; strict controls on money printing – Siyambalapitiya
September 15, 2023

The new Central Bank Act, aimed at bolstering the bank’s independence, accountability and price stability in the country, comes into effect today (15 Sep.), Acting Minister of Finance Ranjith Siyambalapitiya said.

Accordingly, the Acting Minister explained that as per the new Act, the Central Bank of Sri Lanka’s (CBSL) ability to print money will be limited, as opposed to their manners of printing money, rather excessively, in the recent past.

He emphasised that such money printing would be allowed only under special circumstances, such as a concern of national security or a global health crisis, adding that only an amount not exceeding 5% of the value of the issued Treasury Bills can be printed.

Siyamabalapitiya further explained that the CBSL will now be required to work towards achieving the set inflation target, and in the event it fails to do so, it will be required to explain why.

Meanwhile, with regards to appointments to the General Board of Governors of CBSL, Siyambalapitiya emphasised that the Treasury Secretary will no longer be involved in this process. He added that the qualifications required for such appointments have also been listed in the new CBSL Act, while all such appointments will require approval from the Constitutional Council.

https://www.adaderana.lk/news.php?nid=93412