Holiday mood keeps activity in secondary bond market at bay

• Money market rates remain stable on high liquidity 
• Rupee continues to depreciate on seasonal outflows

By Wealth Trust Securities

The lethargic sentiment witnessed in the secondary bond market during the previous week continued during the shortened trading week ending 24 December as well with yields fluctuating within a narrow range on the back of thin volumes.

The limited activity was seen on the most sorted maturities of 15.12.22, 2023’s (i.e. 15.07.23 and 01.09.23), 2024’s (i.e. 15.09.24 and 01.12.24) and 15.05.30 at levels of 5.74% to 5.75%, 5.99%, 6.00% to 6.02%, 6.44%, 6.48% to 6.52% and 7.78% respectively against its previous weeks closing level of 5.70/75, 5.90/00, 5.93/00, 6.40/48, 6.45/55 and 7.75/80. In addition, 15.12.21, further 2024’s (i.e. 01.01.24 and 15.03.24 and 01.03.26 were seen changing hands at levels of 5.00%, 6.17% to 6.20%, 6.25% to 6.26% and 6.80% respectively as well. In the secondary bill market, bills maturing in July, October and December 2021 traded at levels of 4.75%, 4.87% and 4.92% respectively. 

The same sentiment was even witnessed at the weekly primary bill auction as only 51.80% was accepted in total against its total offered amount of Rs. 40 billion. The weighted average rates were registered in line with its stipulated cut off rates of 4.67%, 4.78% and 5.03% respectively on the 91 day, 182 day and 364 day maturities.

Meanwhile, foreign outflows from rupee bonds continued for a fourth consecutive week to the tune of Rs. 1.18 billion for the week ending 23 December 2020, accumulating a total outflow of Rs. 1.76 billion over the past four weeks. 

The daily secondary market Treasury bond/bill transacted volumes for the first three trading days of the week averaged Rs. 6.95 billion. 

In the money market, the weighted average rates on overnight call money and repos remained mostly unchanged at 4.54% and 4.58% respectively as the total outstanding market liquidity stood at a surplus of Rs. 231.10 billion. The CBSL’s holding of Gov. Security’s stood at Rs. 642.10 billion.

Rupee continued to depreciate

In Forex markets, the Rupee on its spot next contracts continued to depreciate during the week to close the week at Rs. 191.00/193.00 against its previous weeks closing level of Rs. 188.10/30 on the back of continued buying interest by Banks coupled with seasonal outflows. Spot contracts remained unquoted.

The daily USD/LKR average traded volume for the first three days of the week stood at $ 44.31 million. 

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