Downward shift of the yield curve for a second consecutive week

• Average money market liquidity increases
• Rupee fluctuates

By Wealth Trust Securities

The sentiment in the secondary bond market remained bullish during the week ending 16 October as yields were seen decreasing, predominantly following the weekly Treasury bill auction outcome, at which the total offered amount of Rs. 40 billion was fully subscribed for the first time in five weeks. 

Continued buying interest on the liquid maturities of the 2021s (i.e. 15.11.22 and 15.12.22), 2023s (i.e. 15.01.23, 15.07.23 and 01.09.23), 15.09.24, 01.05.25, 01.02.26 and 2027s (i.e. 15.08.27 and 15.10.27) saw its yields hit weekly lows of 5.50%, 5.52%, 5.58%, 5.65%, 5.75%, 6.03%, 6.30%, 6.50%, 6.85% and 6.87% respectively against its previous weeks closing level of 5.60/68 each, 5.65/72, 5.80/90 each, 6.15/20, 6.40/50, 6.65/70, 6.90/95 and 6.95/00 reflecting an downward shift of the overall yield curve for a second consecutive week. 

Furthermore, activity was seen on the two 2026s (i.e. 01.06.26 and 01.08.26) and 15.05.30 maturities as well, at levels of 6.59% to 6.62%, 6.65% to 6.87% and 7.40% to 7.41% respectively. 

The foreign holding in rupee bonds remained steady at Rs. 13.33 billion for the week ending 14 October. 

The daily secondary market Treasury bond/bill transacted volumes for the first four trading days of the week averaged Rs. 13.56 billion.  

In the money market, the average rates on overnight weighted call money and repo stood at 4.53% and 4.59% respectively for the week as the average net overnight surplus liquidity increased to Rs. 179.99 billion for the week against its previous week of Rs. 159.62 billion. 

The DOD (Domestic operations Department) of Central Bank injected liquidity during the week by way of 13 to 14 day reverse repo auctions at weighted average yields ranging from of 4.53% to 4.54% while the CBSL’s holding of Government Securities decreased marginally to record a face value of Rs. 457.76 billion.  

Rupee fluctuates 

In the Forex market, USD/LKR rate on spot contracts was seen trading within the range of Rs. 184.15 to Rs. 185.10 during the week before closing the week at Rs. 184.20/30 against its previous weeks closing level of Rs. 184.15/30. 

The daily USD/LKR average traded volume for the first four days of the week stood at $ 129.90 million.  

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