Positive sentiment in the bond market gathers momentum

• Parallel shift down on the yield curve
• Foreign outflow for the first time in nine weeks
• Rupee dips marginally

By Wealth Trust Securities

The secondary bond market yields decreased considerably during the week ending 22 July 2022, continuing the downward momentum witnessed over the later part of the previous week.  The increase in demand at the weekly Treasury bills auction which saw weighted average rates decreasing across the board for the first time in five weeks coupled with an improvement in investor sentiment were seen as the reasons that led to the downward momentum.

Yields of the liquid maturities of 01.06.25 and 15.07.29 decreased to weekly lows of 24.82% and 24.50% respectively against its previous weeks closing levels of 27.00/75 and 27.75/25. In addition, 15.06.27 and 15.01.28 maturities traded at lows of 24.97% and 24.50% respectively as well while two-way quotes on the rest of the curve were seen decreasing to reflect a downward shift of the overall yield curve while in continues to remain inverted.

In the secondary bill market, October 2022 and July 2023 maturities traded at lows of 28.00% and 28.50% respectively against its post auction highs of 31.00% and 29.50%.

The foreign holding in rupee bonds decreased during the week ending 20 July by 0.61 billion, reversing an increase witnessed over the previous eight weeks while the National Consumer Price Index (NCPI; Base 2013=100) for the month of June jumped to a high of 58.9% on its point to point against its previous month’s figure of 45.3%.

The daily secondary market Treasury bond/bill transacted volumes for the first four trading days of the week averaged Rs. 14.03 billion.

In money markets, the total outstanding liquidity deficit was registered at Rs. 591.75 billion by the end of the week against its previous weeks of Rs. 521.76 billion while the CBSL’s holding of Gov. Security’s stood at Rs. 2,267.25 billion against its previous weeks of Rs. 2,269.33 billion. The weighted average rates on call money and repo stood at 15.50% each for the week.

Forex market 

In the Forex market, the middle rate for USD/LKR spot contracts closed the week at Rs. 361.30 against its previous weeks closing of Rs. 361.24.

The daily USD/LKR average traded volume for the first four trading days of the week stood at $ 80.01 million.

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