Bond market sentiment remains positive

• Money market liquidity increases
• Rupee appreciates 

By Wealth Trust Securities

The secondary bond market remained positive and active during the week ending 12 June with yields continuing to decrease, reflecting a downward parallel shift of the overall yield curve. The downward momentum was supported by the outcome of the weekly Treasury bills auction, at where the 364-day bill weighted average decreased for a first time in three weeks and the impressive Treasury bonds auction outcomes, at where weighted average yields were recorded equal to its pre-auction rates but below its stipulated cut off rates.

The yields of most demanded maturities of 15.12.22, 15.01.23, 2024’s (i.e. 01.01.24, 15.03.24, 15.06.24 & 15.09.24), 01.05.25 and 15.10.27 dipped to weekly lows of 7.57%, 7.62%, 8.05%, 8.10%, 8.20%, 8.17%, 8.37% and 8.70%, respectively, against the previous weeks closing levels of 7.67/72, 7.73/75, 8.20/30, 8.30/35, 8.32/38, 8.35/38, 8.48/52 and 8.85/88. Furthermore, other maturities of 2023’s (i.e. 15.05.23, 15.07.23, 01.09.23 & 15.12.23), 2025’s (i.e. 15.03.25 & 01.08.25) and 01.02.26 were seen changing hands at lows of 7.80%, 7.78%, 7.85%, 7.90%, 8.40%, 8.45% and 8.50%, respectively, as well.

In the bill market, June 2020 maturities were seen changing hands at levels of 6.52% to 6.55%, August 2020 to October 2020 maturities 6.57% to 6.80% while December 2020 and May 2021 maturities changed hands at levels of 6.80% to 6.90%. 

The foreign holding in rupee bonds recorded a minute increase of Rs. 2.34 million for the week ending 10 June.

The daily secondary market Treasury bond/bill transacted volumes for the first four days of the week averaged Rs. 15.20 billion. 

In money markets, the Central Bank Domestic Operations Department refrained from conducting any auction throughout the week as the overall money market liquidity increased to Rs. 63.69 billion against its previous week of Rs. 30.6 billion. The weighted average yields on overnight call money and repo rates averaged 5.79% and 5.90%, respectively, for the week.

Rupee appreciates further 

In the Forex market, the rupee on its spot contracts appreciated during the week to hit a high of Rs. 185 before closing the week at levels of Rs. 185.30/45 and in comparison to its previous weeks closing levels of Rs. 185.45/55 on the back of continued selling interest by banks.

The daily USD/LKR average traded volume for the first four days of the week stood at $ 92.95 million. 

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