I write about #investing and #PublicSpeaking to make you a better person than yesterday.
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Personal views.NOT investment advice.RTs≠endorsements
Oct 29 • 14 tweets • 4 min read
Explainer: Did CBSL actually print money?
No.
@Economynext's piece on alleged “money printing” went viral and subsequently, @CBSL issued a clarification.
Want to know which is which? In simple terms?
Please keep reading.
🧵Thread. 1/ @CSE_Media
Background
@Economynext makes two key points.
CBSL injected LKR 100 Bn by 25th Oct: 1. 70 Bn for 7 days via term auction 2. 36 Bn via an overnight auction
Also, they try to validate this by below: 3. By 25th Oct, excess liquidity deposited with CBSL was 193 Bn
2/
Jul 3 • 12 tweets • 4 min read
EXPLAINER: What did we agree with ISB Holders?
Sri Lanka reached an agreement with ISB Holders.
The deal includes a haircut of 11% on accrued interest and 28% on nominal value (base case scenario).
Want to digest this in simple terms?
🧵Thread:
1/ @CSE_Media @CBSL
TL;DR
• Sri Lanka, the Steering Committee (representing ~50% of ISB holders) and its advisors held a two-day working session in Paris, on 27 and 28 Jun 2024
• Parties agreed to a core set of financial terms on restructuring of the ISBs
2/
Feb 8 • 18 tweets • 4 min read
Explainer: Relaxing SDF and SLF Restrictions
@CBSL yesterday relaxed SDF and SLF restrictions which were placed in Jan 2023.
Want to know what this means? In English?
Pls keep reading.
🧵Thread:
1/18
@CSE_Media
What is SDF/SLF?
SDF (Standing Deposit Facility)
Banks can park their excess money on overnight basis. SDF Rate (SDFR) now is 9%.
SLF (Standing Lending Facility)
Banks can borrow money on O/N basis. SLFR is now 10%.
Collectively, SDFR + SLFR is called "CBSL policy rates".
2/18
Jan 21 • 10 tweets • 2 min read
What shall I do when interest rates are falling?
If you have noticed, market rates have fallen, all the way from 30%+ to (almost) single digits.
@CBSL led the way by cutting rates 650bps in 2023.
🧵Thread:
Keep reading to see where rates might be headed.
1/10
@CSE_Media
Will inflation fuel higher rates?
While inflation have bottomed-out, space remains for rates to fall.
Theoretically, lower rates induce consumption led demand-pull inflation.
Practically, for now, it's unlikely, due to deep cuts in purchasing power (tax + price hikes).
2/10
Apr 24, 2023 • 18 tweets • 6 min read
Everyone talks of Domestic Debt Restructuring, but no one worked the numbers.
"Without data, you're just another person with an opinion"
I did the math, so you don’t have to.
TL;DR
A maturity extension is needed for ALL bonds, not just long-term ones.
• These are personal views based on my calculations.
• Those calculations are very much simplified. Actuals might massively differ.
• Figures are based on published data as of 31.12.2023.
2/
So far #SriLanka has talked about restructuring ext debt & not domestic debt.
Our paper shows that current IMF targets for DR are unlikely to deliver a sustainable pathway for econ recovery & debt management, unless rates are brought down by over 10%.
2/10
Feb 19, 2023 • 5 tweets • 3 min read
🤔 Playing it safe? 🚫
You might be risking everything! 💥
• Nominal int rate: rate of return earned in “money” terms
• Real int rate: rate of return earned in “real” (purchasing power) terms. It's the return after adjusting for effect of #inflation (impact of rising price levels)
2/6
Feb 9, 2023 • 9 tweets • 3 min read
History Repeats: @CBSL imposes restrictions on discretionary payments (DPs) of banks
What?
CBSL imposed set of restrictions on DPs of banks.
When?
With immediate effect.
These mirror the set of restrictions issued in May 2022, for Financial Year (FY) 2022.
• possible adverse impact on liquidity and capital position of banks due to the current economic conditions, and,
• importance of maintaining appropriate levels of liquidity and capital levels to ensure sustainability.
2/9
Feb 3, 2023 • 12 tweets • 4 min read
#SriLanka ISB holders Group insists that Domestic Debt is "reorganised"
This has both good as well as bad sides.
Let me tell you all about it, in English.
1/12
@CSE_Media#EconomicCrisisLK
The "Group"
• Known as "an ad-hoc creditor committee"
• Consists of 100+ foreign investors
• Led by a steering committee of 10+ members
• Represents over 55%+ of ISBs non- domestic holdings
• Advised by Rothschild and White & Case
China is still a developing country. So, China will try to offer support to all developing countries, but, they expect to be paid back because it's a developing country.
1/4 @CSE_Media
So, a haircut in Chinese context is politically very difficult.
But they understood that there are ways in which they can reach the equivalent of a haircut by stretching maturities, reducing or eliminating interest rates & payments.
Paris Club is also engaging with China.
2/4
Jan 12, 2023 • 5 tweets • 2 min read
How did Money Market (MM) turned a surplus?
Let me tell you how.
MM turned a surplus of LKR 57 Bn today. This was after 27 Aug 2021.
End 2022 MM was at a deficit of 231 Bn. That's the net amount of money borrowed from CBSL SLF (Standing Lending Facility). 1/5 @CSE_Media
SLF operates on an overnight basis.
So, a deficit of LKR 231 Bn refers to the overnight market deficit.
Since then, CBSL have injected liquidity by way of term repos, ranging from 28 to 90 days.
2/5
Jan 4, 2023 • 13 tweets • 4 min read
Déjà Vu: SDF restrictions are back!
@CBSL restricted access to its Standing Deposit (SLF) and Standing Lending Facility (SLF) to Banks.
Last time this happened was in Sep 2014.
Let me tell you:
• Why?
• What?
• How?
in a simple way.
1/6
Yes, taxes take our money away. We feel it as it’s visible.
But if you look closely, inflation takes away more.
It’s a silent serial killer.
It’s worse for low/middle income groups, because they spend most % share of their income on food.
Remember, food inflation is 95%.
2/6
Oct 11, 2022 • 5 tweets • 3 min read
New Taxes: Inland Revenue Amendment Bill published
Personal Income Tax
• Tax rates range from 6%, 12%, 18%, 24%, 30% and 36%, in slabs of Rs. 500,000.
• Effective from 01.10.2022.
• For 6 months (01.10.2022 to 31.03.2023) the amounts are pro-rated by 50%
1/5 @CSE_Media@CSE_Media Changes from 2022 Interim Budget
• As per my understanding, these rates differ from what was published then.
• Original rates were 4%, 8%, 12%, 16%, 20%, 24%, 28% and 32%, for each Rs 1.2 Mn slabs.
• I'm not a tax expert. Hope someone would confirm this.
2/5
Oct 8, 2022 • 12 tweets • 4 min read
Everyone talks about Treasury Bonds and their attractive 30%+ returns.
But what do you mean by TBs & jargons like coupons, YTM, etc? Is it actually risk free?
I've been working with TBs for the last 15+ years.
Here's how you can know what I know in 1.5 minutes. @CSE_Media
1/12
What is a T Bond?
TBs are issued by @CBSL on behalf of the Govt of Sri Lanka, for funding expenditure.
Since the issuer is Govt, they are part of Govt. Securities (GSec).
As the Govt. can print money to repay, they are "technically" credit risk free. More on this later.