Bond rally continues ahead of weekly bill auctions

By Wealth Trust Securities

The bullish trading rally in the secondary bond market continued yesterday as yields was seen crashing across the curve for a second consecutive day on the back of persistent buying interest by both local and foreign participants. 

The liquid 2023s (i.e. 15.03.23, 15.05.23, 15.07.23 and 15.12.23), 2024s (i.e. 15.03.24, 15.06.24 and 15.09.24), 01.08.26 and 15.10.27 maturities saw its yields dip to lows 9.20%, 9.25%, 9.23%, 9.40%, 9.50%, 9.46%, 9.50%, 9.80% and 9.85% respectively against its previous day’s closing levels of 9.32/37, 9.45/50, 9.45/48, 9.50/60, 9.75/80 each, 9.78/82, 9.95/05 and 10.07/10.  

In addition, on the short end of the yield curve 2021s (i.e. 01.03.21 and 15.10.21) and 2022s (i.e. 01.07.22 and 01.10.22) were seen changing hands within the range of 8.35% to 8.55% and 8.70% to 9.00% respectively while on the long end, 01.05.29 and 15.09.34 maturities changed hands at levels 10.05% and 10.28% to 10.50% respectively as well.

Today’s auction will have on offer a total amount of Rs. 19 billion, consisting of Rs. 4 billion of the 91-day, Rs. 5 billion of the 182-day and Rs. 10 billion of the 364-day maturities. At last week’s auction, the 91-day and 364-day bill weighted averages increased by seven and 10 basis points respectively to 7.56% and 8.51% while all bids received on the 182 day maturity was rejected. In secondary bills, October and November 2020 maturities were seen changing hands at 8.20% to 8.30% and 8.30% to 8.43% respectively.

The total secondary market Treasury bond/bill transacted volumes for 18 November was Rs. 17.91 billion. 

In money markets, the overnight call money and repo rates averaged 7.53% and 7.58% respectively as the overnight net liquidity surplus in the system increased to Rs. 10.45 billion yesterday. The Open Market Operations (OMO) Department of Central Bank injected an amount of Rs. 15 billion by way of an overnight Reverse repo auction at a weighted average rate of 7.53%.

Rupee appreciates further     

In the Forex market, the USD/LKR rate on the spot contracts were seen appreciating further yesterday to close the day at Rs. 179.30/40 against its previous day’s closing of Rs.179.50/60 on the back of continued selling interest by banks.

The total USD/LKR traded volume for 18 November was $ 72.95 million.

Some of the forward USD/LKR rates that prevailed in the market were: one month – 179.80/95; three months – 180.80/00; and six months – 182.55/85.