Overall yield curve shifts down for fifth consecutive week

• Treasury bond auctions in focus
• Money market liquidity remains high

The downward trend in secondary market bond yields witnessed over the past four weeks continued during the week ending 10 July as well, driven by policy rates been slashed by 100 basis points, to record its lowest level seen since the year 2000. The trend was given further impetus by the weekly Treasury bill auction outcomes, pre rate cut, where the weighted average rate on the market favourite 364 day bill decreased for a fifth consecutive week to 5.32%. 

The overall yield curve witnessed a parallel shift downwards, as the liquid maturities of 15.12.22, 15.01.23, 15.09.24, 01.05.25, 01.02.26 and 15.10.27 saw its yields dip to hit weekly lows of 5.45%, 5.52%, 6.23%, 6.35%, 6.60% and 6.70% respectively against its previous weeks closing levels of 5.77/80, 5.89/92, 6.41/45, 6.53/63, 6.70/77 and 6.90/00. 

This was ahead of today’s (13) Treasury bond auctions, where a total amount of Rs. 40 billion will be on offer, consisting of Rs. 25 billion on a 2 year and 5 months maturity of 15.12.2022 and Rs. 15 billion on a 5 year and 07 months maturity of 01.02.2026. The weighted average yields at the auctions conducted on 29 June 2020 for the maturities of 15.12.2022 and 15.08.2027 were recorded at 5.86% and 6.97% respectively. 

Meanwhile, the foreign holding in Rupee bonds continued to decrease, recording a marginal outflow of Rs. 49 million for the week ending 8 July.

The daily secondary market Treasury bond/bill transacted volumes for the first four days of the week averaged Rs. 14.62 billion. 

In money markets, the base rate change saw weighted average yields on overnight Call money and Repos averaging at 4.53% and 4.54% respectively for the last two days of the week against its first three days average of 5.51% and 5.54% respectively. The overall market liquidity increased to Rs. 166.68 billion. 

Rupee remains steady

In the Forex market, the USD/LKR rate on the spot contracts was seen closing the week steadily at Rs. 185.80/90, subsequent to trading within the range of Rs. 185.65 to Rs. 185.98 during the week. 

The daily USD/LKR average traded volume for the first four days of the week stood at $ 85.50 million. 

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