Monetary policy rates slashed for sixth occasion

Wednesday, 27 March 2024 01:03 - - {{hitsCtrl.values.hits}}

11-week low of Rs. 80 b offered at weekly Treasury bills auction

By Wealth Trust Securities

The Central Bank of Sri Lanka resumed its monetary easing cycle by reducing its monetary policy rates for a sixth time since June 2023 at its second review meeting for the year 2024 which was announced yesterday.

A decrease of 50 basis points saw the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) reduce to 8.50% and 9.50% respectively accumulating a total decrease of 700 basis points or 7.00% since June 2023. The Statutory Reserve Ratio (SRR) remained steady at 2.00%.

Nevertheless, the secondary bond market yields were seen closing the day mostly unchanged with liquid maturities of 15.12.26 and 15.12.28 changing hands at levels of 11.30% and 12.00% to 12.10% respectively. In addition, maturities of 01.02.26, 15.05.26, 15.01.27, 01.05.27 and other 2028’s (i.e. 15.01.28, 15.03.28, 01.05.28 & 01.07.28) changed hands at levels of 10.85%, 11.28% to 11.32%, 11.35% to 11.40%, 11.80% and 12.00% to 12.13% respectively as well.

The Treasury bill auction due today will see a total volume of only Rs. 80 billion on offer, a reduction of Rs. 75 billion from the previous week, making it the lowest offered amount in 11 weeks. This will consist of Rs. 20 billion on the 91-day maturity and Rs. 30 billion each on the 182-day and 364-day maturities. At last week’s auction, weighted average rates increased across the board for a fourth consecutive week by 13 and 14 basis points each on the 91-day, 182-day and 364-day maturities respectively to 10.23%, 10.35% and 10.38%. An amount of Rs. 139.80 billion was accepted in total at the auction while a further amount of Rs. 6.09 billion was raised at its Phase II on the 182-day and 364-day maturities.

The total secondary market Treasury bond/bill transacted volume for 25 March was Rs. 14.29 billion.

In money markets, the base rate decrease resulted in weighted average rates on overnight call money decreasing to 8.73%, while repo held broadly steady at 9.28%, as against the previous days of 9.17% and 9.37%.

The net liquidity deficit stood at Rs. 1.97 billion yesterday as an amount of Rs. 14.47 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 9.50% against an amount of Rs. 83.80 billion deposited at Central Bank’s SDFR (Standard Deposit Facility Rate) of 8.50%.

Further, the DOD (Domestic Operations Department) of Central Bank injected liquidity by way of an overnight and seven-day reverse repo auction for Rs. 36.30 billion and Rs. 35.00 billion at the weighted average rates of 8.69% and 8.92% respectively.

Forex market

In the forex market, the USD/LKR rate on spot contracts continued to strengthen as it was seen closing the day up at Rs. 301.90/302.00 against its previous day’s closing level of Rs. 302.60/302.70.

The total USD/LKR traded volume for 25 March was $ 69.03 million.

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

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