Primary bond auction outcome drives secondary yields lower

By Wealth Trust Securities

The Central Bank of Sri Lanka was seen successfully raising a total amount of Rs. 40 billion through two Treasury bond auctions yesterday. 

The two year and 11 months maturity of 15.03.2022 and the seven year and nine months maturity of 15.01.2027 were seen recording weighted averages of 10.72% and 11.24% respectively.

In the secondary bond market yesterday, yields were seen decreasing subsequent to the auction results mainly on the liquid maturities of two 2021s (i.e. 01.08.21 and 15.12.21), 15.03.24, 15.01.27 and 01.05.29 to intraday lows of 10.45%, 10.52%, 10.90%, 11.16% and 11.32% respectively  against its previous day’s closing level of 10.51/55, 10.55/62, 10.98/00, 11.17/25 and 11.37/41. In addition, the new 15.03.22 and three 2023s (i.e. 15.03.23, 15.07.23 and 15.12.23) maturities were seen changing hands within the range of 10.69% to 10.70%, 10.82% to 10.90% as well.

This was ahead of today’s weekly Treasury bill auction, where a total amount of Rs. 28 billion will be on offer consisting of Rs. 4 billion each of the 91-day maturity and the 182-day maturity and further Rs. 20 billion of the 364-day maturity. 

At last week’s auction, the weighted averages of the 182-day and 364-day maturities decreased by 12 basis points each to 9.67% and 10.40% respectively while the weighted average of the 91-day decreased by 10 basis points to 9.39%.

The total secondary market Treasury bond/bill transacted volumes for 1 April was Rs. 2.40 billion.

Meanwhile in money markets, the injection of liquidity by way of an overnight and seven day reverse repo auction amounting to Rs. 10 billion and Rs. 13 billion respectively at a weighted average rate of 8.52% and 8.51% by the Open Market Operations (OMO) Department of the Central Bank resulted in the weighted averages of overnight call money and repo rates remaining mostly steady at 8.52% and 8.59% respectively. The liquidity in the system stood at a net deficit of Rs. 24.37 billion. 

Rupee appreciates further

 The USD/LKR rate on the spot contracts were seen appreciating further yesterday to close the day at Rs. 174.45/60 against its previous day’s closing of Rs. 174.60/75 on the back of exporter conversion and seasonal inflows.

The total USD/LKR traded volume for 1 April was $ 114.28 million.

Given are some forward USD/LKR rates that prevailed in the market: one month – 175.45/65; three months – 177.30/60; six months – 180.15/45.