The central bank had previously rejected bids for 1.5 billion worth of two-year and five-year T-bonds at auctions held on Nov. 20 and Nov. 13.

The bank held its key policy rates steady for the ninth successive month last week, repurchase rate at 10.5 percent and reverse repurchase rate at 12 percent, even though annual inflation on a 12-month moving average rose to 17.7 percent in October.

Dealers said the average bid was around 20 percent.

"No one will consider a lower rate at the moment, because the central bank itself gave an indication of rates going up, by allowing T-bill rates to go up at last two auctions," said Thangararajah Thayalan, a dealer at HNB treasury.

All three 91-day, 182-day, and 364 day T-bill rates rose by 100 basis points at the last treasury bill auction on Wednesday, where the 364-day yield rose to 19.07 percent, a six-year high.

Benchmark 91-day T-bill rate, used by banks to determine their own lending rates, rose to 17.07 percent from 16.07 percent a week ago, while the 182-day T-bill yield rose to 18.79 percent at Wednesday's auction.

The 364-day T-bill yield declined by 23 basis points to 17.16 percent on Oct. 26, two days after a $500-million inflow to the country from the debut of a sovereign bond.

The benchmark 91-day T-bill rate has fallen 272 basis points to 15.74 in four straight auctions since Oct. 9, after central bank said it had secured the $500 million bond issue.

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