Rs. 165 billion bond auctions bullish on short tenures

• Secondary bond market rallies Rupee up slightly
• Record breaking Rs. 220 billion T. Bill auction in focus

By Wealth Trust Securities 

The Treasury bond auctions conducted yesterday recorded positive responses on the short tenures at its 1st phase, with the entire offered amount on the durations of 2026 and 2028 being fully taken up. This is ahead of the IMF executive board’s decision on Sri Lanka’s 1st review of the EFF program. However, no bids were accepted on the 2031 duration.  

A direct issuance window for the 01.08.26 and 15.12.28 maturities is open until close of the business of the day prior to settlement date (i.e., 4.00 pm on 14.12.2023) at the weighted average yield rate determined at the 1st phase. 

The secondary bond market witnessed a rally coinciding with the bond auction, as buying interest pushed down yields while activity increased. Accordingly, the maturities of the three 26’s (15.05.26, 01.06.26 and 01.08.26), three 27’s (15.01.27, 01.05.27 and 15.09.27) and two 28’s (01.05.28 and 01.07.28), 15.05.30 and 01.07.32 traded within the ranges of 14.10 to 13.95%, 14.20% to 13.95%, 14.25% to 14.10%, 14.25% and 14.30% respectively.

Meanwhile, the weekly Treasury bill auction due today will have in total an amount of Rs. 220 billion on offer, which will consist of Rs. 70 billion on the 91-day maturity, Rs. 75 billion on the 182-day maturity and a further Rs. 75 billion on the 364-day maturity. This is incidentally the largest offered amount at a primary Treasury bill auction in Sri Lanka’s history.

For context, at last week’s Treasury bill auction, weighted average yields decreased across the board for a second consecutive week. The 91-day and 182-day tenors continued to see the most demand, which led to the weighted average yields declining by 19 basis points and 14 basis points respectively to 14.67% and 14.38%. The 364-day bill also declined marginally by one basis point to record a weighted average of 12.88%. The entire offered amount of Rs. 185 billion was raised at the 1st phase of the auction while an additional Rs. 0.5 billion was raised at the 2nd phase only on the 364-day maturity. 

The total secondary market Treasury bond/bill transacted volume for 11 December was Rs. 6.64 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 9.19% and 9.87% respectively while the net liquidity deficit stood at Rs. 41.60 billion yesterday.

The DOD (Domestic Operations Department) of Central Bank injected liquidity by way of an overnight auction for Rs. 30 billion at a weighted average rate of 9.05% and 30-day term reverse repo of Rs 50 billion at 10.89% respectively. An amount of Rs. 20.90 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 10.00% while an amount of Rs. 9.30 billion was 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. 326.90/327.00 against its previous day’s closing level of Rs. 327.00/327.30. 

The total USD/LKR traded volume for 11 December was $ 27.35 million. 

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