Bond market bullish ahead of weekly bill auction

• Rupee gains

By Wealth Trust Securities

The secondary bond market started off the day on a dull note with yields creeping up, but a subsequent surge of buying pushed down yields at the close of business yesterday, with an increase in activity. Demand was seen centering on the short to medium end of the yield curve. Accordingly, the maturities of 01.06.25, two 26’s (15.05.26, 01.06.26), three 27’s (15.01.27, 01.05.27 and 15.09.27), three 28’s (15.01.28, 01.05.28 and 01.07.28), 15.05.30 and 01.07.32 changed hands at levels of 14.00% to 13.70%, 14.20% to 14.00%, 14.35% to 14.10%, 14.40% to 14.15%, 14.35% to 14.25% and 14.30% respectively.

Meanwhile, the weekly Treasury bill auction due today will have in total an amount of Rs. 185 billion on offer, which will consist of Rs. 55 billion on the 91-day maturity, Rs. 60 billion on the 182-day maturity and a further Rs. 70 billion on the 364-day maturity.

At last week’s auction, weighted average yields decreased across the board. The 91-day and 182-day bills saw the most demand, which led to its weighted average yields declining by 43 basis points and 23 basis points respectively to 14.86% and 14.52%. The 364-day bills also declined by 05 basis points to record a weighted average of 12.89%. The entire offered amount of Rs. 160 billion was raised at the 1st phase of the auction, with an additional Rs. 30.97 billion raised at the 2nd phase. 

The total secondary market Treasury bond/bill transacted volume for 4 December 2023 was Rs. 9.46 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 9.24% and 9.72% respectively while the net liquidity deficit stood at Rs. 34.74 billion yesterday.

The DOD (Domestic Operations Department) of Central Bank injected liquidity by way of an overnight auction for Rs. 30.73 billion at the weighted average rates of 9.10%. An amount of Rs. 18.42 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 10.00% while an amount of Rs. 14.42 billion was deposited at Central Banks SDFR (Standard Deposit Facility Rate) of 9.00%. 

Forex Market 

In the Forex market, the USD/LKR rate on spot contracts closed the day at Rs. 327.40/327.90 against its previous day’s closing level of Rs. 328.10/328.30.

The total USD/LKR traded volume for 4 December was $ 54.00 million.