Rs. 155 billion bond auctions bullish on short tenures

• Secondary bond market rallies
• Rupee up further

By Wealth Trust Securities 

The Treasury bond auctions conducted yesterday recorded positive responses mainly on the short tenures at its 1st phase, with the entire offered amount on the 2026 and 2028 durations being fully taken up. This in turn will see a further 20% been offered on each maturity, through a direct issuance window, until close of business today. (i.e. 4.00 p.m. on 29.12.23). The 01.02.2026 maturity recorded a weighted average rate of 13.87% while the 15.03.2028 recorded a weighted average rate of 14.21%. 

For context at the previous auctions conducted on 12 December, a 2026 duration bond was seen recording a weighted average of 14.07% and a 2028 duration bond was seen recording a weighted average of 14.32%. As such yields on the short end of the yield curve were seen shifting down on the back of significant buying interest. 

However, Only Rs. 150.43 billion was accepted in total, against a total offered amount of Rs. 155 billion, leading to phase 2 of the auctions been opened for the 15.05.30 maturity as it was not fully taken up. On 12 December auction, the medium tenure 2031 maturity offered saw no bids accepted.

The secondary bond market witnessed a rally post-auction, as buying interest pushed down yields while activity increased after remaining relatively quiet prior. Accordingly, the maturities of the four 26’s (01.02.26, 15.05.26, 01.06.26 and 01.08.26), 15.01.27 and 01.07.28 traded within the ranges of 14.00% to 13.85%, 13.85% to 13.80% and 14.15% respectively.

The total secondary market Treasury bond/bill transacted volume for 27 December was Rs. 30.05 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 auction for Rs. 56.40 billion at a weighted average rate of 9.08%. 

The net liquidity deficit stood at Rs.82.37 billion yesterday with an amount of Rs. 35.32 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 10.00% against an amount of Rs. 9.35 billion deposited at Central Banks SDFR (Standard Deposit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 at Rs. 323.90/324.00 against its previous day’s closing level of Rs. 324.00/324.10. 

The total USD/LKR traded volume for 11 December was $ 55.69 million. 

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