Rs. 122.50 b Treasury bill auction in focus

• Secondary bond market remains active; yields hold broadly steady
• Rupee continues to advance

By Wealth Trust Securities 

This week’s Treasury bill auction due today, will have in total an amount of Rs. 122.50 billion on offer, which will consist of Rs. 35.00 billion on the 91-day maturity, Rs. 47.50 billion on the 182-day maturity and a further Rs. 40.00 billion on the 364-day maturity. This reflects an increase of Rs. 2.50 billion on the offered amount on a week-on-week basis.

For context, during the weekly Treasury bill auction conducted last Wednesday (21.02.24), the weighted average yields remained largely unchanged, following five consecutive weeks of steep declines across all tenors. Only the 91-day maturity registered a marginal drop of 01 basis point to 9.78%, while the 182-day and 364-day maturities remained static at 9.86% and 10.02%, respectively. The auction went undersubscribed for the first time in seven weeks, with only Rs. 103.81 billion (86.51% of the total offered amount of Rs. 120.00 billion) raised during the 1st phase. This was despite total bids exceeding the offered amount by over two times. A further Rs. 3.11 billion was raised at the 2nd phase.

The secondary bond market yesterday remained active, with trading continued to be mostly centred on the short to medium end of the yield curve. Yields were seen holding broadly steady on the liquid popular durations from 2026-2028. Accordingly, trades were observed on 2026 tenors (15.05.26, 01.06.26 and 01.08.26), 2027 tenors (15.09.27), 2028 tenors (01.05.28, 01.07.28 and 15.12.28) within the ranges of 11.00% to 10.85%, 12.00% to 11.90%, 12.20% to 12.10%. Additionally, trades were observed on the 15.05.30 maturity within the range of 12.50% to 12.20%. Volumes overall continued to be healthy.

In secondary market bills, May 2024 maturities (approximately 3 months) were seen changing hands at 10.10% to 9.95%. Similarly, August 2024 (approximately 6 months) maturities were seen trading at 9.85%.

The total secondary market Treasury bond/bill transacted volume for 26 February was Rs. 23.14 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 9.14% and 9.85% respectively as the DOD (Domestic Operations Department) of Central Bank injected liquidity by way of an overnight and 7-day term reverse repo auction for Rs 29.78 billion and Rs. 40.20 billion at the weighted average rates of 9.13% and 9.50% respectively.

The net liquidity deficit stood at Rs. 37.34 billion yesterday as an amount of Rs. 1.34 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 10.00% against an amount of Rs. 33.97 billion been deposited at Central Banks SDFR (Standard Deposit Facility Rate) of 9.00%. 

Forex Market 

In the Forex market, the USD/LKR rate on spot contracts closed the day stronger at Rs. 310.25/310.50 against its previous day’s closing level of Rs.310.80/311.00.

 The total USD/LKR traded volume for 26 February was $ 134.77 million. 

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