Bond market activity improves; Yields hold steady despite some fluctuation 

• Rs. 78 billion T. Bill auction in focus
• Rupee slips

By Wealth Trust Securities 

The secondary bond market yesterday saw yields initially decline on the back of considerable buying interest with substantial volumes being transacted. However, trading towards the latter part of the day moderated while yields closed the day broadly unchanged.

 This was against the back-drop of the news that Sri Lanka’s recent debt restructuring talks with international bondholders had not reached a finalized conclusion and that despite progress, points of contention still persist. The news generated mixed reactions as optimism was shared that negotiations are still ongoing and likely will be concluded in the next few coming weeks. However, international sovereign bond prices were seen declining on the news. In addition, it was also stated by government officials that the bilateral debt aspect of external debt restructuring had seen considerable progress and was nearing conclusion.

 Trading was predominantly on the short end of the yield curve, with a particular emphasis on 2026 and 2028 durations. The short tenor 01.07.25 was seen changing hands at the rate of 10.60%. The liquid 2026 tenors of 01.06.26 and 01.08.26 were seen hitting intraday lows of 11.10% as against intraday highs of 11.15%. Similarly, the relatively longer 2026 tenor of 15.12.26 was seen declining to an intraday low of 11.30% before moving back up to intraday highs of 11.33%. Meanwhile the popular 2028 tenors (15.01.28, 01.05.28, 01.07.28 and 15.12.28) dropped to intraday lows of 12.09% each before moving back to intraday highs of 12.15%. Activity experienced a significant increase from the lull of the previous day and volumes transacted overall were robust.   

The Treasury bill auction due today will see a total volume of only Rs.78 billion on offer, an increase of Rs. 13 billion from the previous week. This will consist of Rs.30 billion on the 91-day maturity, Rs. 25 billion on the 182-day and Rs. 23 billion on the 364-day maturities.

 For context. at the weekly Treasury bill auction conducted last Tuesday due to a shortened trading week, the weighted average yields experienced marginal declines across all three tenors. The 91-day maturity reduced by 01 basis points to 10.10%, while the 182-day maturity decreased by 03 basis points to 10.27% and the 364-day maturity dropped by 01 basis point to 10.27%. The total offered amount of Rs 65.00 billion was the lowest offered amount in 25 weeks. Despite this, the auction went undersubscribed with only Rs. 58.21 billion or 89.55% out of the total offered amount being raised at the 1st phase of the auction. An additional amount of Rs. 13.92 billion was raised at the 2nd phase.

The total secondary market Treasury bond/bill transacted volume for 15th April was Rs. 7.08 billion.

In money markets, the weighted average rate on overnight call money was at 8.63% and repo was at 8.80%.

The net liquidity surplus stood at Rs. 138.32 billion yesterday as an amount of Rs. 4.85 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 9.50% against an amount of Rs. 162.52 billion deposited at Central Banks SDFR (Standard Deposit Facility Rate) of 8.50%. 

Further, the DOD (Domestic Operations Department) of Central Bank injected liquidity by way of an overnight reverse repo auction for Rs. 19.35 billion at a weighted average rate of 8.61%.

Forex Market 

In the Forex market, the USD/LKR rate on spot contracts closed the day further down at Rs. 300.00/300.75 against its previous day’s closing level of Rs. 299.00/299.10.

 The total USD/LKR traded volume for 15th April was US $ 38.65 million.