Bond yields dip marginally as activity increases

• Secondary market bills continue to see buying interest ahead of auction
• Rupee sees further marginal decline

By Wealth Trust Securities

The secondary bond and bill market saw renewed buying interest, resulting in an uptick in activity yesterday, with yields dipping marginally. This was on the back of positive remarks shared yesterday by the Central Bank of Sri Lanka (CBSL) Governor as follows,

• Sri Lanka has over-performed on key macroeconomic targets such as inflation and exchange rate stability
• Ongoing reforms are poised to generate better than anticipated growth while reaching debt sustainability
• Following the 1st review of the IMF bailout deal a disbursement is expected by November amounting to $ 330 million
• Faster than anticipated cooling of inflation creates space for further monetary policy easing
• Parliament was expected to pass amendments to tax laws which would clear the way for the Domestic Debt Optimisation (DDO) program

Trades were seen on the liquid bond maturities of 01.08.26 and 01.07.28 at levels of 15.75% to 15.50% and 14.80% to 14.65% respectively. Meanwhile in the secondary bill market, September, October, November and December 2023 along with March and April 2024 maturities traded at levels of 15.00%, 17.15% to 15.90%, 17.75% to 17.40%, 18.50% to 17.80% and 16.25% to 15.90% respectively.

Today’s weekly Treasury bill auction will have in total an amount of Rs. 140 billion on offer which will consist of Rs. 60 billion on the 91-day maturity, Rs. 40 billion on the 182-day maturity and a further Rs. 40 billion on the 364-day maturity.

At last week’s auction, the weighted averages increased across the board to 18.48%, 15.36% and 13.58% on the 91-day, 182-day and 364-day maturities respectively. An amount of Rs. 108.14 billion was accepted at the 1st phase of the auction while a further amount of Rs. 9.44 billion was raised at its phase II.

The total secondary market Treasury bond/bill transacted volume for 4 September 2023 was Rs. 13.62 billion.

In money markets, the DOD (Domestic Operations Department) of Central Bank injected liquidity by way of an overnight reverse repo auction for a volume of Rs. 50.00 billion at a weighted average rate of 11.57% while the net liquidity deficit stood at Rs.70.64 billion yesterday.

Further an amount of Rs. 58.34 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 12.00% while the weighted average rates on overnight call money and repo were registered at 11.50% and 12.00% respectively

Forex Market 

In the Forex market, the USD/LKR rate on spot contracts closed at Rs. 321.75/322.25 yesterday against Monday’s closing level of Rs. 320.50/321.50.

The total USD/LKR traded volume for 4 September was $ 20.25 million. 

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