Bearish sentiment in bond markets continue

• Activity at a standstill
• Money market liquidity turns negative

By Wealth Trust Securities

The bearish to negative sentiment in the secondary bond market continued during the week ending 3 September as liquidity in the system turned negative to record its highest net shortfall since January 2004.

This sentiment was seen affecting the primary auctions as the total accepted amount at the Treasury bond auctions was a minute 8% of its total offered amount, or Rs. 4 billion, against an offered amount of Rs. 50 billion. Furthermore, the weekly Treasury bill auction went undersubscribed for a seventh consecutive week as only 36.86% or Rs. 25.21 billion was accepted in total against a total offered amount of Rs. 68.5 billion.

The only activity witnessed during the week was on the short-dated 15.03.22 maturity at levels of 5.90% to 5.908% while a 10 September bill changed hands at a level of 5.90% in the secondary bill market.

The foreign holding in Rupee bonds remained steady at Rs. 2.087 billion for the week ending 1 September, while the daily secondary market Treasury bond/bill transacted volumes for the first four trading days of the week averaged Rs. 4.69 billion. 

In money markets, liquidity was seen turning negative during the week to a staggering shortfall of Rs. 181.72 billion by the end of the week against its previous week’s surplus of Rs. 13.26 billion. This intern saw the weighted average rates on overnight call money and repo increasing marginally to average 5.87% and 5.80%, respectively, for the week against its previous weeks 5.77% and 5.75%. The CBSL’s holding of government securities increased to Rs. 1,261.07 billion from its previous week’s Rs. 1,215.1 billion.

Rupee trades on spot contracts

In the Forex market, the USD/LKR rate on spot contracts was traded at Rs. 203.02 during the week while the overall market continued to remain inactive.

The daily USD/LKR average traded volume for the first four trading days of the week stood at $ 15.73 million. 

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