Overall activity remains moderate in bond market

• Primary auctions produce mixed results
• Reduction in money market liquidity continues

By Wealth Trust Securities

Activity in the secondary bond market remained moderated during the week ending 4 June as most market participants continued to be on the sidelines. Limited activity was witnessed on the maturities of 2022s (i.e., 01.10.22, 15.11.22 and 15.12.22), 2023s (i.e., 15.01.23, 15.03.23, 15.07.23, 01.09.23 and 15.11.23), 01.05.25, 2026s (i.e., 15.01.26 and 01.02.26), and 15.08.27 at levels of 5.62% to 5.70%, 5.65% to 5.70%, 5.80%, 5.78%, 6.00%, 6.12% to 6.14%, 6.22%, 6.28% to 6.33%, 7.00% to 7.01%, 7.30% to 7.34%, 7.30% and 7.53%, respectively.

Mixed results at the primary auctions further supported the dull sentiment, where the two bond auctions conducted on Tuesday saw its combined total offered amount of Rs. 25 billion successfully subscribed at its first phase of the auctions while recording impressive weighted averages. Nevertheless, only 60.24% of its total offered volume was accepted at the weekly Treasury bill auction on Wednesday (2 June) against its previous week’s 96.38% while the cut-off level on the 364-day bill was increased by 3 basis points to 5.21%. 

The foreign holding in rupee bonds recorded a marginal inflow of Rs. 6.31 million for the week ending 2 June while the Colombo Consumer Price Index (CCPI) increased 4.5% on its point to point for the month of May against 3.9% recorded in April. 

The daily secondary market Treasury bond/bill transacted volumes for the first four trading days of the week averaged Rs. 9.71 billion. 

In money markets, weighted average rates on overnight call money and repo edged up further to average 4.71% and 4.73%, respectively, for the week as the total outstanding liquidity surplus decreased further for a fifth consecutive week to Rs. 104.80 billion. The CBSL’s holding of Government securities increased marginally to Rs. 868.57 billion. 

 USD/LKR

The forex market continued to remain inactive during the week. The USD/LKR rate on cash and tom contracts traded at a level of Rs. 199.99 during the week. 

The daily USD/LKR average traded volume for the first four trading days of the week stood at $ 47.49 million. 

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