Bond market yields crash downwards on aggressive buying

• Weekly Treasury Bill averages continue to ease; auction fully subscribed
• SRR cut by 200 bps

By Wealth Trust Securities

The Central Bank of Sri Lanka in a proactive move was seen decreasing its Statutory Reserve Ratio (SRR) applicable on all rupee deposit liabilities of Licensed Commercial Banks (LCBs) by 200 basis points, from 4.00 per cent to 2.00 per cent, with effect from the reserve maintenance period commencing 16 August, at its announcement on yesterday.

The secondary bond market saw yields tumbling down on the news of the SRR cut. The liquid maturities of 15.05.26, 15.09.27 and 15.05.30 dipped to intraday lows of 12.50%, 11.90% and 11.00% against its opening highs of 14.50%, 14.20% and 13.15% respectively.

The Treasury bill weighted average rates were seen decreasing across board for a third consecutive week at its auctions held yesterday. The decline was 12, 46 and 22 basis points on the 91-day, 182-day and 364-day maturities respectively.

The total offered volume of Rs. 180 billion was accepted at the 1st phase of the auction while the phase 2 of the auction will be opened for all 3 maturities at their weighted averages until close of business of the day prior to settlement (i.e., 4.00 p.m. on 10.08.2023). 

The total secondary market Treasury bond/bill transacted volume for 8 August was Rs. 5.58 billion.

In money markets, the DOD (Domestic Operations Department) of Central Bank injected liquidity by way of overnight and 7-day reverse repo auctions for a total volume of Rs. 116.75 billion at weighted average rates of 11.47% and 12.00% respectively while an amount of Rs. 62.66 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 12.00%. The net liquidity deficit stood at Rs. 178.93 billion yesterday.

The weighted average rates on overnight call money and repo were registered at 11.72% and 12.00% respectively.

 Forex Market 

In the Forex market, the USD/LKR rate on spot contracts traded within the range of Rs. 319.00 to Rs. 320.80 yesterday before closing the day at Rs. 319.00/320.00.  

The total USD/LKR traded volume for 8 August was $ 14.10 million.

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