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Sri Lanka Treasuries yields up

Aug 22, 2012 (LBO) - Sri Lanka's 12-month Treasuries yields rose 05 basis points to 13.
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27 percent at Wednesday's auction, while the 3-month rate was flat at 11.36 percent, the state debt office said.
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Excess liquidity in money market, which came from unsterilized foreign exchange purchases in the last week of July dried up this week.

Analysts say if money markets are kept short and the Central Bank does not permanently inject money in to the system the dollar peg can strengthen.

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The rupee which was strengthening up to the third week of July amid tight monetary policy stopped appreciating and even came under pressure on some days from liquidity generated from capital inflows purchased by the Central Bank.

The 6-month yield rose 07 basis points to 13.02 percent.

The debt office said 1.7 billion rupees of 3-month bills, 8.6 billion rupees of 6-month bills and 1.

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3 billion rupees of 12 month bills were sold.

The state offered 13 billion rupees of bills for roll-over but only 12.

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7 billion rupees of bids were accepted from the market, the debt office said.
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The debt office which is a division of the central bank can print money and buy bills, which pushes up inflation and weakens the island's dollar peg.

Last year the debt office rejected entire auctions to print money and permanently sterilize foreign exchange sales, triggering a balance of payments crisis.

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