Optimistic start for Secondary Bond market in March

Tuesday, 4 March 2025 02:56 - - {{hitsCtrl.values.hits}}

Rupee steady

By WealthTrust Securities

The Secondary Bond market yesterday commenced the new trading week on a positive note, as strong buying interest was seen pushing yields lower, specifically on the 2029 and 2030 tenors.

This was against the backdrop of the news that the International Monetary Fund (IMF) Executive Board completed the Third Review under the Extended Fund Facility (EFF) arrangement with Sri Lanka and provided the fourth tranche amounting to approximately $ 334 million. This came amidst favourable statements by the IMF Deputy Managing Director, who said the economic recovery in the country was remarkable. The official statement went on to acknowledge improvements in key metrics, such as that Sri Lanka’s “inflation remains low, revenue collection is improving, and reserves continue to accumulate.”

“Economic growth averaged 4.3% since growth resumed in the third quarter of 2023. By end-2024, Sri Lanka’s real GDP is estimated to have recovered 40% of its loss incurred between 2018 and 2023. The recovery is expected to continue in 2025.”

Despite concentrated interest observed on the 2029 and 2030 tenors, the rest of the yield curve held broadly steady and consolidated. This resulted in further flattening of the yield curve. Overall transaction volumes and market activity were seen at healthy levels.

The yield on the 15.12.26 maturity held steady and traded at the rate of 8.75%. The 15.02.28 and 01.05.28 bonds were seen trading within the rates of 10.00% and 10.10%-10.08%, respectively. The 15.06.29 and 15.09.29 maturities traded down the ranges of 10.65%-10.62% and 10.75%-10.72%, respectively. The 15.05.30 and 15.10.30 maturities were seen trading at the rate of 10.95% and 11.07%-11.02%, respectively.

In secondary market bills, the March, November, and December 2025 maturities were observed trading at the rates of 7.65%-7.60%, 8.15%, and 8.25%, respectively.

The total secondary market Treasury bond/bill transacted volume for 28 February was Rs. 9.62 billion.

In money markets, the weighted average rates on overnight call money and repo stood at 7.98% and 8.02%, respectively.

The net liquidity surplus stood at Rs. 157.03 billion yesterday. Rs. 6.83 billion was withdrawn from the Central Bank’s SLFR (Standing Lending Facility Rate) of 8.50%, while an amount of Rs. 163.86 billion was deposited at the Central Bank’s SDFR (Standard Deposit Facility Rate) of 7.50%.

Forex market

In the Forex market, the USD/LKR rate on spot contracts remained mostly unchanged to close

the day at Rs. 295.28/295.30.

The total USD/LKR traded volume for 28 February was $ 88.20 million.

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

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