Monetary policy announcement in focus today

• Rs. 45 b on offer at Treasury bond auctions
• 2Y bond yield hits 18.50%

By Wealth Trust Securities 

The third monetary policy announcement for the year 2022 is due today at 5.30 p.m. The monetary board of the Central Bank of Sri Lanka increased its policy rates by 100 basis points to 6.50% and 7.50% on its Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) respectively at its announcement on 04 March.

The primary Treasury bond auctions due today will see a total volume of Rs. 45 billion on offer consisting of Rs. 25 billion of a 15.03.2025 maturity and Rs. 20 billion of a 15.12.2027 maturity. At the bond auctions conducted on 29 March, all bids were rejected for the first time since February 2017.

In secondary bond market trading yesterday, the liquid two year maturity of 01.08.24 was seen hitting a high of 18.50% for the first time since the year 2009.

The total secondary market Treasury bond/bill transacted volume for 06 April was Rs. 48.76 billion.   

In money markets, the weighted average rates on overnight Call money and REPO were at 7.49% and 7.50% respectively as an amount of Rs. 604.76 billion was withdrawn from Central Banks SLFR (Standard Deposit Facility Rate) of 7.50%. 

The net liquidity deficit was registered at Rs. 555.78 billion yesterday as an amount of Rs. 108.98 billion was deposited at Central Banks SDFR (Standard Deposit Facility Rate) of 6.50%.  

Furthermore, the Domestic Operations Department (DOD) of the Central Bank of Sri Lanka was seen injecting an amount of Rs. 60 billion by way of a five day reverse Repo auction at a weighted average rate of 7.50%.

Forex Market 

The Forex market remained inactive for a seventh consecutive day yesterday.

The total USD/LKR traded volume for 6 April was $ 3.10 million.  

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