Monetary policy in focus; weekly T-bill auctions continue bullish run

By Wealth Trust Securities

The weekly weighted average rates were seen continuing its bullish drive at its auctions conducted yesterday, on the back of continued buying interest ahead of the eighth monetary policy announcement for the year 2021 due today at 7.30 am. The monetary board of the Central Bank of Sri Lanka kept policy rates unchanged at 5% and 6% on its Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) respectively at its announcement on the 14 October.

The total offered amount of Rs. 61 billion was successfully accepted for a sixth consecutive week at yesterday’s weekly Treasury bill auction, as its bids-to-offer ratio stood at 2.76:1. The market favourite 91-day bill maturity recorded a dip of 24 basis points to 7.53%, while the 182-day and 364-day bills registered dips of one basis point each to 8.02% and 8.16% respectively. 

Nevertheless, activity in the secondary bond market remained moderate yesterday with most market participants opting to be on the side lines. Limited trades were seen on the maturities of 2023’s (i.e. 15.11.23 and 15.12.23), 15.12.24 and 15.03.31 at levels of 8.80%, 9.45% to 9.47% and 11.85% respectively. In secondary bills, January 2022 maturities traded at levels of 7.45% to 7.55%.

The total secondary market Treasury bond/bill transacted volume for 23 November was Rs. 4.03 billion.   

In money markets, the net liquidity deficit stood at Rs. 224.10 billion yesterday as an amount of Rs. 323.19 billion was withdrawn from the Central Bank’s SLFR of 6% against an amount of Rs. 69.64 billion deposited at the Central Bank’s SLDR of 5%. The Domestic Operations Department (DOD) of the Central Bank of Sri Lanka drained out an amount of Rs. 29.45 billion by way of an overnight Repo auction at a weighted average rate of 5.99% while the weighted average rates on overnight call money and Repo was registered at 5.92% and 5.96% respectively.

USD/LKR   

In the Forex market, the overall market remained inactive yesterday while the USD/LKR rate on cash contracts traded at a level of Rs. 203.

The total USD/LKR traded volume for 23 November was $ 28.25 million.   

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