Bond market activity centres on short end of yield curve 

• Weekly bills auction produces positive outcome
• Policy rates unchanged

By Wealth Trust Securities

The activity witnessed in the secondary bond during the week ending 9 July predominantly centred on the very short end of the yield curve, with a focus on the 2023 maturities, which led to a further steepening on the short end of the yield curve.

Prior to the announcement of the cut-offs on the Treasury bond auctions due on Tuesday, buying interest during most part of the week, mainly around the 2023 maturities (i.e. 15.03.23, 15.07.23, 01.09.23 and 15.11.23) saw its yields dip to weekly lows of  5.83%, 6.00%, 6.05% and 6.18%, respectively, against its previous week’s lows of 5.90%, 6.03%, 6.11% and 6.24%. In addition, maturities of 15.11.22 and 15.01.23 dipped to lows of 5.56% and 5.63%, respectively, while maturities of 15.03.24 and 01.12.24 changed hands at levels of 6.40% and 6.70%, respectively, as well. However, yields were seen increasing once again on Friday from its weekly lows.

The weekly Treasury bill auction continued its positive outcomes, as the total accepted amount increased to 93.63% of its total offered amount.

The foreign holding in rupee bonds remained mostly unchanged at Rs. 2.49 billion for the week ending 7 July, while the monetary board of the Central Bank of Sri Lanka, at its announcement made on 8 July kept its policy rates of Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) steady at 4.50% and 5.50%, respectively, for an eighth consecutive announcement.

The daily secondary market Treasury bond/bill transacted volumes for the first four trading days of the week averaged Rs. 10.38 billion.  

In money markets, the total outstanding liquidity surplus increased marginally for the first time to four weeks to Rs. 85.17 billion while the CBSL’s holding of government securities decreased slightly to Rs. 917.05 billion. The weighted average rates on overnight call money and repo averaged 4.94% and 4.96%, respectively, for the week.

USD/LKR

The forex market continued to remain inactive during the week. The daily USD/LKR average traded volume for the first four trading days of the week stood at $ 52.36 million.  

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