Bond yields increase; parallel shift up of the yield curve

• Weekly T. Bill auction fully subscribed; averages increase
• Foreign holding in LKR securities increase further
• Inflation decreases
• Rupee dips marginally

By Wealth Trust Securities

The upward movement in the secondary bond market continued during the week ending 21 April 2023, despite the weekly Treasury bill auction receiving full subscription, albeit at higher yields and foreign portfolio inflows continuing for a 10th consecutive week.

At the weekly auction, the total offered amount of Rs. 90 billion was successfully taken up at its first phase while weighted averages increased for a second consecutive week. The foreign holding in LKR government securities increased further by Rs. 14.17 billion for the week ending 20 April while its overall tally stood at Rs. 116.60 billion.

Meanwhile, the National Consumer Price Index – NCPI (Base; 2021=100) or National inflation for the month of March came in at 49.2% on its point to point as against 53.6% recorded in February.

The bond market activity centred on the liquid maturities of 01.07.25, 15.05.26 and two 2027’s (i.e., 01.05.27 and 15.09.27) as its yields increased to intraweek highs of 29.15%, 27.27%, 27.00% and 26.90% respectively against its previous weeks closing levels of 27.50/28.00, 26.50/27.00 and 25.80/26.00 each. In addition, maturities of 15.01.28, 15.07.29 and 01.07.32 changed hands at levels of 25.00% to 25.05%, 25.25% to 25.27% and 22.50% to 23.00% as well. This resulted in an upward shift of the overall yield curve.

The daily secondary market Treasury bond/bill transacted volumes for the first four trading days of the week averaged Rs. 28.47 billion.

In money markets, the total outstanding liquidity deficit decreased to Rs. 62.96 billion by the end of the week against its previous week’s deficit of Rs. 125.23 billion while CBSL’s holding of Government Securities decreased marginally to Rs. 2,697.88 billion against its previous week’s of Rs. 2,698.61 billion.

USD/LKR

In the forex market, the USD/LKR rate on spot contracts depreciated marginally during the week to close the week at Rs. 321.50/75 as against the previous week’s closing level of Rs. 320.00/25.

The daily USD/LKR average traded volume for the first four days of the week stood at $ 56.97 million. 

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