Sri Lanka’s borrowing costs rise

June 21, 2006 (LBO) - Sri Lanka's borrowing costs went up during Wednesday's treasury bill auction, as the Central Bank bought a further 3-billion rupees worth of paper for its stock of government securities.





The bank offered 7.799 billion rupees worth of bills which came up for maturity, but accepted only 2.

375 billion rupees from the market.

The auction attracted bids worth 10.

595 billion rupees.

The bank retired 2.324 billion rupees worth of paper.

Sri Lanka raised interest rates by 25 basis points last Friday to cool off inflationary pressures brought about by soaring oil related costs.

Treasury yields, however, have been creeping up gradually as the island's security situation deteriorates.

Market players expect the government to incur extra cost to pay for sudden defence payments.

A surge of violence between the government and the Tamil Tiger rebels has seen at least 815 people killed since December in the north and the east of the island.

Details of the auction are as follows:

Maturity	Bids received	Amount accepted	Weighted avg. yield
	(Rs. mn)	(Rs. mn)	This week	Last week
Three months	4,201	1,789	10.13	10.09
Six months	3,122	220	10.44	10.38
One-year	3,272	366	10.45	10.40
Total	10,595	2,375	10.21	10.17
(Source: Central Bank))