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Friday Nov 29, 2024
Wednesday, 22 November 2023 00:08 - - {{hitsCtrl.values.hits}}
By Wealth Trust Securities
The secondary bond market saw aggressive buying interest yesterday, leading to an increase in activity levels while yields dipped. Trades were predominantly observed on the short end of the yield curve, with sizable transaction volumes seen on selected maturities.
However, activity began to moderate and yields stabilised towards the end of the day. This is against the backdrop of the monetary policy announcement due and news that the IMF is ready to proceed with the Extended Funding Facility program with Sri Lanka, once sufficient financing assurances are provided by official creditors.
Accordingly, the maturities of 01.08.24, two 25s (01.06.25 and 01.07.25), two 26s (01.06.26 and 01.08.26), three 27s (15.01.27,01.05.27 and 15.09.27), two 28’s (01.05.28 and 01.07.28) were seen changing hands at levels of 14.25%, 14.50%, 14.75% to 14.55%, 14.85% to 14.55% and 14.75% to 14.65% respectively.
In secondary market bills, February 2024 maturities were seen trading at 15.15%.
The weekly Treasury bill auction due today will have in total an amount of Rs. 145 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. 30 billion on the 364-day maturity.
For context, last week’s auction (held on 15.11.23) saw weighted average yields decrease across all three maturities for a second consecutive week. The 91-day and 182-day bills saw significant demand, leading to declines of 25 basis points and 6 basis points respectively to 15.39% and 14.75%. The 364-day bills also declined by 3 basis points to record a weighted average of 12.96%. A total amount of Rs. 205.08 billion was taken up at the 1st and 2nd phases of the auction against a total offered amount of Rs. 175 billion.
On the inflation front, the National Consumer Price Index-NCPI (Base: 2021=100) or National inflation for the month of October was recorded at 1% on its point to point as against 0.80% recorded in September. This is the first instance that inflation has accelerated, albeit marginally, since the peak of 53.60% in February of 2023. Since February 2023, inflation has been on a steady and rapid disinflation path, reaching the current significantly moderated levels compared to a year ago.
This is in line with the Central Bank of Sri Lanka’s projections. The central bank had earlier expressed the view that the disinflation trend might reverse due to increased energy tariffs and higher taxes, but it anticipates price increases stabilising at a 5% target in the medium term.
The total secondary market Treasury bond/bill transacted volume for 20 November 2023 was Rs. 14.50 billion.
In money markets, the weighted average rates on overnight call money and Repo stood at 10.24% and 10.55% respectively while the net liquidity stood at a deficit of Rs. 78.99 billion yesterday.
The DOD (Domestic Operations Department) of Central Bank injected liquidity by way of an overnight Repo auction for Rs. 39.81 billion at a weighted average rate of 10.14%. An amount of Rs. 39.85 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 11% while an amount of Rs. 0.68 billion was deposited at the Central Banks SDFR (Standard Deposit Facility Rate) of 10.00%
Forex Market
In the Forex market, the USD/LKR rate on spot contracts closed the day marginally weaker at Rs. 328.60/328.75 yesterday against its previous day’s closing level of Rs. 328.00/328.20.
The total USD/LKR traded volume for 20 November was $ 45.45 million.
(References: Central Bank of Sri Lanka, Bloomberg E-Bond trading platform, Money broking companies)
