Bond market off to a strong start; rupee gains marginally

By Wealth Trust Securities

The secondary bond market commenced the week on an upbeat note with robust activity and yields declining. This resurgence in the bullish sentiment coincided with the news that a Treasury bond auction will not be conducted in line with the coupon maturity settlement due on 01st March 2024. Trading continued to be predominantly on the short end of the yield curve with a particular emphasis on 2026 to 2028 tenors. 

Accordingly, 2026 durations (01.06.26, 01.08.26 and 15.12.26) were seen trading down from 11.00% to 10.85% levels during the day, while 2027 tenors were seen hitting intraday lows of 11.80% as against opening highs of 12.00% as well. Similarly, 2028 maturities (01.07.28, 01.09.28 and 15.12.28) were seen dropping to intraday lows of 12.05% from highs of 12.30%. Additionally, trades were observed on the following maturities of 01.07.25, relatively shorter 2026 tenor of 01.02.26, relatively shorter 2027 tenor of 15.01.27 and 01.07.32 at levels of 10.20%, 10.80% to 10.70%, 11.15% to 11.10% and 12.55%. In conclusion the rally saw yields fall well below last week’s closing levels on the back of substantial volumes.

In secondary market bill transactions, April 2024 maturities (a little less than 3 months) and late February 2025 (approximately 6 months) maturities were seen changing hands at 9.80% and 9.90% to 9.85% respectively with sizable volumes transacted once again.

The total secondary market Treasury bond/bill transacted volume for 22 February was Rs. 7.52 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 9.16% and 10.00% respectively. The DOD (Domestic Operations Department) of the Central Bank injected liquidity by way of an overnight and 7-day term reverse repo auction for Rs. 29.50 billion and Rs. 50.00 billion at the weighted average rates of 9.22% and 9.74% respectively.

The net liquidity deficit stood at Rs. 65.04 billion yesterday as an amount of Rs. 3.05 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 10.00% against an amount of Rs. 17.51 billion deposited at Central Banks SDFR (Standard Deposit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 gaining marginally to Rs. 310.80/311.00 against its previous day’s closing level of Rs. 310.95/311.05.

The total USD/LKR traded volume for 22 February was $ 107.85 million. 

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