Bullish outcomes at primary auctions continue

• Parallel downward shift of the yield curve
• Foreign holding in LKR bonds down to Rs. 36.1 b
• Rupee appreciates

By Wealth Trust Securities 

The shortened trading week ending 9 April saw the weighted average yield on the market favourite 364-day bill declining sharply once again to hit an over-four-year low of 7%, while accumulating a total drop of 148 basis points over the past five weeks. 

The primary Treasury bond auctions conducted during the week reflected bullish outcomes as well with maturities of 01.09.23, 15.09.24 and 15.10.27 recording impressive weighted averages of 8.50%, 8.70% and 8.90% respectively. 

This in turn kept the secondary bond market bullish during the week as the yield curve recorded a parallel shift downward week on week, which was given a further boost by the possible $ 1,400 million in SWAP lines from India and China. 

The yields on the liquid maturities of 01.05.21, 01.10.22, 2023s (i.e. 15.07.23, 01.09.23 and 15.12.23), 2024s (i.e. 15.03.24 and 15.09.24) and 15.10.27 were seen declining to intraweek lows of 7.85%, 8.55%, 8.90%, 8.85%, 9.00%, 8.98%, 9.00% and 9.35% respectively against its previous weeks closing levels of 8.00/25, 8.80/85, 9.15/20, 9.20/28, 9.30/35, 9.35/40, 9.33/40 and 9.55/70.

Meanwhile, the shortened trading week commencing 15 April will see Rs. 30 billion on offer at the weekly Treasury bill auction, consisting of Rs. 7 billion of the 91-day maturity, Rs. 10 billion of the 182-day maturity and a further Rs. 13 billion of the 364-day maturity. 

At last week’s auction, the weighted average yields plunged on the 182-day and 364-day maturities to 6.80% and 7.00% respectively. All bids received on the 91-day bill were rejected.

Meanwhile, the foreign component in rupee bonds decreased for a 11th consecutive week to register an outflow of Rs. 4.97 billion for the week ending 8 April 2020, reducing its overall holding to Rs. 36.08 billion. 

In money markets, overnight call money and repo rates averaged at 6.50% and 6.59% respectively for the week as the DOD (Domestic operations Department) of Central Bank injected liquidity during the week by way of seven-day, 88-day and 89-day reverse repo auctions at weighted average yields ranging from of 6.39% to 6.60%. 

The overall money market liquidity in the system decreased during the week to Rs. 21.44 billion against its previous week of Rs. 69.14 billion.

USD/LKR

In the Forex market, the USD/LKR rate on spot contracts appreciated on Friday to a high of Rs. 190 against its week’s low of Rs. 199.75. 

The daily USD/LKR average traded volume for the first two days of the week stood at $ 103.25 million.

(References: Central Bank of Sri Lanka, Bloomberg E-Bond trading platform, money broking companies)

Given below are the secondary market yields for the most frequently traded maturities,