Bond market takes U-turn

• Weekly auction undersubscribed for 2nd consecutive week
• Foreign inflow during the week
• Liquidity continues to improve
• Rupee dips marginally

By Wealth Trust Securities

The secondary bond market took a U-turn during the week ending 24 February, as yields increased during the latter part of the week reversing a decreasing trend witnessed during the first half of the week.

Yields on the liquid maturities of 01.07.25 and two 2027s (i.e., 01.05.27 and 15.09.27) decreased to intraweek lows of 31.85%, 28.65% and 28.85% respectively before taking a U-turn on the back of selling interest to hit weekly highs of 32.10%, 29.18% and 29.00% respectively. The downward momentum was supported by the news regarding IMF’s Extended Fund Facility (EFF) to Sri Lanka while the upward trend was supported by the outcome of the weekly Treasury bills auction, where the auction went undersubscribed for a second consecutive week as only Rs. 56.43 billion was accepted in total against a total offered volume of Rs. 75 billion.

This was ahead of the T-bond auctions scheduled for today where a total amount of Rs. 35 billion is on offer, consisting of Rs. 15 billion of 15.01.2025 and Rs. 20 billion of 15.09.2027, carrying coupon rates of 22.50% and 20.00% respectively.

At the last bond auctions conducted on 30 January, the 01.05.2027 maturity was issued at a weighted average rate of 29.21% while its offered amount of Rs. 55.00 billion was accepted at its first phase. However, only an amount of Rs. 12.91 billion of the 01.07.2025 maturity was accepted at a weighted average rate of 32.19% against an offered amount Rs. 15 billion.

The foreign holding in Rupee bonds increased to Rs. 32.47 billion recording an inflow of Rs. 7 billion for the week ending 23 February while the daily secondary market Treasury bond/bill transacted volumes during the first four trading days averaged Rs. 19.61 billion.

In money markets, the weighted average rates of overnight call money and repo transactions carried out during the week was 15.49% and 15.50% respectively while the total outstanding liquidity deficit decreased to Rs. 53.94 billion by the end of the week against its previous week’s figure of Rs. 125.15 billion.

The CBSL’s holding of Government Securities registered at Rs. 2,615 billion against its previous week’s of Rs. 2,583.96 billion.

USD/LKR

In the forex market, the middle rate for USD/LKR spot contracts depreciated during the week to close the week at Rs. 362.668 as against the previous week’s closing level of Rs. 361.92.

The daily USD/LKR average traded volume for the first four days of the week stood at $ 62.19 million. 

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