Primary auction yield curve Inverts

• 5 year fully subscribed; 3 year falls short

By Wealth Trust Securities

 The outcome of the two Treasury bond auctions conducted yesterday led to the yield curve inverting as weighted averages of the three month to one year Treasury bills were 23.50% and above while the three year and five year bond maturities recorded weighted averages of 22.01% and 22.16% respectively. This was the first Treasury bond auction conducted since the steep increase in policy rates.

 The offered amount of Rs. 15 billion on the five year maturity (01.05.2027) was fully subscribed at a weighted average of 22.16% while only an amount of Rs. 13.11 billion was accepted on the three year maturity (01.06.2025) against an offered amount of Rs. 20 billion at a weighted average of 22.01%.  The second phase of the auction was opened on the three year maturity while a direct issuance window of 20% is opened on the five year maturity until close of business of the day prior to settlement (i.e., 4.00 pm on 29.04.2022). Given below are the details of the auction,

 Meanwhile, activity in the secondary bond market remained muted yesterday while July 2022 and April 2023 maturities were traded at levels of 21.90% and 22.10% respectively. 

In money markets, the weighted average rates on overnight Call money and REPO were at 14.50% each as an amount of Rs. 796.71 billion was withdrawn from Central Banks SLFR (Standard Deposit Facility Rate) of 14.50%. 

The net liquidity deficit was registered at Rs.610.73 billion yesterday as an amount of Rs. 185.98 billion was deposited at Central Banks SDFR (Standard Deposit Facility Rate) of 13.50%.  

Forex Market 

The Forex market continued to remain inactive.   The total USD/LKR traded volume for 27 April 2022 was $ 8.11 million.  

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