Money market liquidity continues to fluctuate

• Bond market remains bearish
• Weekly auction rates unchanged; subscription below 50%
• CBSL bill holding exceeds Rs. 900 b once again

By Wealth Trust Securities

The shortened trading week ending 25 June saw continued fluctuations in the overnight surplus liquidity in money markets, from over a two month low of Rs. 77.81 billion to a high of Rs. 91.62 billion by the end of the week. 

The CBSL’s holding of Government securities increased over Rs. 900 billion once again, to record Rs. 919.22 billion by the end of week against its previous week’s Rs. 896.24 billion. Nevertheless, the total outstanding liquidity surplus decreased further to record a surplus of Rs. 91.62 billion against its previous week’s Rs. 94.09 billion. The weighted average rates on overnight call money and repo increased marginally to average 4.84% and 4.90%, respectively, for the week.

The outcome of the weekly Treasury bill auction saw its subscription increase marginally to 42.28% of its total offered amount against its previous weeks 39.76%, while its weighted averages remained unchanged.

Trading activity in both the bill and bond markets remained rather low during the week as a result of a persistent bearish sentiment in the market. Limited activity took place within a narrow range on the maturities of 2022’s (i.e. 01.10.22 and 15.12.22), 2023’s (i.e. 15.01.23, 15.03.23, 15.07.23, 01.09.23, 15.11.23 and 15.12.23), 01.12.24 and 15.01.26 at levels of 5.65% to 5.67%, 5.69%, 5.80% to 5.81%, 5.90%, 6.05% to 6.08%, 6.15%, 6.25% to 6.26%, 6.27% to 6.28%, 6.70% and 7.30%, respectively. In the secondary bill market, August, September and December 2021 maturities traded at levels of 4.95% to 5.11%, 5.12% to 5.18% and 5.16% to 5.18%, respectively.

The foreign holding in rupee bonds increased marginally for the first time in three weeks with an inflow of Rs. 19.37 million for the week ending 23 June, while inflation or the National Consumer Price Index (NCPI) for the month of May increased for a fourth consecutive month to 6.1% on its point to point against its previous months 5.5%. The daily secondary market Treasury bond/bill transacted volumes for the first three trading days of the week averaged Rs. 6.13 billion. 

USD/LKR

The forex market continued to remain inactive during the week. The daily USD/LKR average traded volume for the first three trading days of the week stood at $ 55.37 million. 

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