Rs. 155 b Treasury Bill Auction in focus

• Secondary bond market edges down on improved activity
• Rupee sees further gains

 By Wealth Trust Securities

This week’s Treasury bill auction due today, will have in total an amount of Rs.155.00 billion on offer, which will consist of Rs.45.00 billion on the 91-day maturity, Rs.70.00 billion on the 182-day maturity and a further Rs. 40.00 billion on the 364-day maturity. This reflects a decrease of Rs 25.00 billion on the total offered amount on a week-on-week basis.

For context, at the weekly Treasury bill auction last Wednesday (13th March 2024), the weighted average yields were seen increasing across all three maturities, for a third consecutive week. The 91-day maturity increased by 14 basis points to 10.10%, the 182-day maturity increased by 13 basis points to 10.21%, while the 364-day maturity also went up by 10 basis points to stand at 10.24%. As such, rates across all three maturities were seen moving above the Central Bank’s Standing Lending Facility Rate of 10.00%, for the first time in 5 weeks. The auction went undersubscribed with only 92.94% or Rs. 167.30 billion out of the Rs. 180.00 billion offered raised at the 1st phase of the auction. An additional amount of Rs 1.45 billion was raised at the 2nd phase on the 91- and 182-day tenors.

The secondary bond market yesterday saw increased activity, as compared to the previous day where the market was virtually at a standstill for much of the day. Yields initially moved sideways but closed down on the back of significant buying interest. Trading as usual continued to be predominantly on the short end of the yield curve with a particular emphasis on 2026-2028 tenors.  Accordingly, yields were seen declining on the 2028 tenors (01.07.28 and 15.12.28) to intraday lows of 12.06% from intraday highs of 12.15%, on the back of sizeable volumes. Similarly, the 15.12.26 were seen declining to intraday lows of 11.30% from highs of 11.35%, while the 01.05.27 maturity was seen declining to 11.78% from highs of 11.85%, also with healthy volumes transacted. Additionally, trades were observed on the medium tenor bonds of 15.05.30 and 15.03.31 maturities at the rate of 12.20% and 12.10% on relatively thinner volumes.

In secondary market bills, April, May and June 2024 maturities were seen changing hands at 9.75%, 10.25% to 10.00% and 10.10% to 10.15% levels respectively on the back of substantial volumes.

The total secondary market Treasury bond/bill transacted volume for 18 March was Rs. 1.67 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 9.17% and 9.21% respectively as the DOD (Domestic Operations Department) of the Central Bank injected liquidity by way of an overnight and 7-day term reverse repo auctions for Rs 55.80 billion and Rs. 38.50 billion at the weighted average rates of 9.11% and 9.24% respectively.

The net liquidity deficit stood at Rs. 80.20 billion yesterday as an amount of Rs. 9.32 was withdrawn from the Central Bank’s SLFR (Standing Lending Facility Rate) at 10.00% and 23.42 billion was deposited at Central Banks SDFR (Standing Deposit Facility Rate) at 9.00%. 

 Forex Market 

In the Forex market, the USD/LKR rate on spot contracts closed the day marginally stronger at Rs. 303.95/304.05 against its previous day’s closing level of Rs.304.35/304.50.

The total USD/LKR traded volume for 18 March was US $ 112.10 million. 

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

companies)