11-year bond yield hits 13%

• Bond yields move up across the yield curve 
• Foreign inflow during the week
• CBSL security holding and liquidity shortfall remains high

By Wealth Trust Securities

The 11-year bond (15.01.2033) yield was seen hitting 13% during its secondary market trading on Friday (28 January) following its primary auction outcome, where it recorded a weighted average of 12.45%. In addition, the three-year and six-month bond maturity of 01.08.2025 recorded a weighted average of 11.49%, similar to its pre-auction rate of 11.40/50. The two maturities saw a total amount of Rs. 50 billion on offer while an amount of Rs. 41.39 billion was accepted in total. A direct issuance window of 20% of the offered amount on the 15.01.2033 maturity was opened until close of business of the day prior to settlement (i.e., 4 p.m. on 31.01.2022). The bids to offer ratio stood at 2.10:1.  In secondary market bond trading during the week ending 28 January, yields were seen edging up, mainly on the three-year maturities of 2025’s (i.e. 15.03.25 and 01.05.25) as selling interest saw it hit highs of 11.40% and 11.41% respectively against its weeks opening levels of 11.05% and 11.20%. Furthermore, maturities of 2022’s (i.e 01.10.22 and 15.12.22), 2024’s (i.e 15.03.24, 15.06.24 and 15.09.24), other 2025’s (i.e 01.08.25 and 15.10.25) and 01.05.28 were seen changing hands at levels of 9.25% to 9.37%, 10.25% to 10.43%, 11.29% to 11.50% and 11.75% respectively as well. 

The foreign holding in Rupee bonds increased to Rs. 2.65 billion, recording an inflow of Rs. 884.69 million for the week ending 26 January while the daily secondary market Treasury bond/bill transacted volumes for the first four trading days of the week averaged Rs. 18.18 billion. 

In money markets, the total outstanding liquidity deficit increased during the week to register Rs. 558.96 billion by the end of the week against its previous week’s Rs. 543.37 billion while CBSL’s holding of government securities increased by Rs. 18.31 billion to Rs. 1,566.13 billion. The weighted average rates on overnight call money and repo was 6.47% and 6.50% respectively for the week. 

The Central Bank Domestic Operations Department (DOD) was seen draining out liquidity during the week by way of overnight repo auctions at weighted average yields ranging from 6.48% to 6.49%. 

 USD/LKR

In the Forex market, the USD/LKR rate on spot contracts continued to trade at Rs. 203 during the week while overall activity remained moderate.  The daily USD/LKR average traded volume for the first four trading days of the week stood at $ 52.78 million.  

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