Bond market remains bearish

• Primary auctions go undersubscribed
• Rupee appreciates

By Wealth Trust Securities

The bearish sentiment which was witnessed in the secondary bond market during the latter part of the previous week continued during the week ending 29 January as well, driven by the primary auction outcomes, where both the T-Bill and T-Bond auctions went undersubscribed. 

The weekly Treasury bill auction was undersubscribed by Rs. 14.9 billion while the Treasury bond auctions were undersubscribed by Rs. 19.47 billion.

The overall yield curve reflected a marginal shift upwards in limited trades on the liquid maturities of 2022’s (i.e. 01.10.22, 15.11.22 & 15.12.22) and 2024’s (i.e. 15.06.24, 15.09.24 & 01.12.24) as its yields hit intraweek highs of 5.43%, 5.45% each, 6.32% each and 6.35%, respectively, against its previous weeks closing level of 5.38/43, 5.40/45, 5.40.47, 6.20/30, 6.25/28 and 6.31/34. In addition, maturities of 2023’s (i.e.15.01.23 & 15.07.23) and 2026’s (i.e. 15.01.26 & 01.0.26) changed hands at levels of 5.55%, 5.70% to 5.72%, 6.65% and 6.70%, respectively, as well.

Meanwhile, inflation (CCPI) for the month of January 2021 decreased sharply to 3% on the basis of its point to point against its previous month 4.2% while its annual average, too, decreased to 4.3%%.

The foreign holding in LKR bonds remained steady at Rs. 7.42 billion.

The daily secondary market Treasury bond/bill transacted volumes for the three-four trading days of the week averaged Rs. 13.11 billion. 

In the money market, the weighted average rates on overnight call money and repo remained mostly unchanged to average 4.54% and 4.56%, respectively, for the week as the total outstanding market liquidity was registered at Rs. 116.14 billion. The CBSL’s holding of government securities increased marginally to Rs. 736.24 billion.

Rupee appreciates 

In the Forex market, activity was seen returning back to spot contracts during the week as it was seen appreciating to close the week at Rs. 191/192 against its previous week’s spot next contract closing level of Rs. 196.50/198.50, subsequent to trading within the range of Rs. 190.75 to Rs. 197.25.

The daily USD/LKR average traded volume for the first three days of the week stood at $ 37.05 million. 

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