Rs. 27.50 Treasury Bond auction fully subscribed; outcome bullish

Friday, 28 February 2025 00:16 - - {{hitsCtrl.values.hits}}

Secondary Bond market yields drop
Rupee appreciates marginally

By Wealth Trust Securities

The round of Treasury Bond auctions conducted yesterday successfully raised the entire Rs. 27.50 billion at the 1st phase in competitive bidding, with a bullish outcome. The total bids received exceeded the offered amount by a staggering 4.56 times. This mirrored both the positive outcome at the Treasury Bill auction conducted the day before and the bullish sentiment in the Secondary Bond market.

In particular, the 15.06.29 maturity (11.75% coupon) recorded a resoundingly bullish outcome and was issued at a weighted average yield of 10.63%. This was well below market expectations as the 15.06.29 maturity was seen quoted at the two-way rate of 10.68%/10.72% and traded at 10.70% prior to the auction. Maturity-wise the entire Rs. 15.00 billion offered was snapped up at the 1st phase of subscription in competitive bidding.

The medium tenor 15.12.32 maturity (11.50% coupon) was issued at the weighted average rate of 11.41%. This was also slightly below market expectations as a similar, slightly shorter tenor, 01.10.32 maturity was seen quoted at the two-way rate of 10.40%/10.48% just prior to the auction. The maturity also raised the entire Rs. 12.50 billion on offer at the 1st phase.

An issuance window for both the maturities will be open until close of business of the day prior to settlement date (i.e., 3 p.m. on 28.02.2025) at their respective Weighted Average Yield Rates (WAYR), up to 10% of the amount offered.

Meanwhile, the Secondary Bond market yesterday rallied. Aggressive buying interest saw yields pushing lower particularly on 2029 and 2030 tenors. Trading activity and transaction volumes were seen at robust levels. A strong demand was seen even prior to the Treasury Bond auction. Following the release of the auction results, the market gained further traction, extending its rally further despite some minor profit taking pressure witnessed at the tail-end of the run.

The yield on the 15.12.26 maturity traded within the range of 8.77%-8.75%. The 15.02.28 maturity was observed trading at the rate of 10.00%. The 01.09.28 maturity was seen holding steady, trading at the rate of 10.30%. The 15.09.29 maturity saw its yield decline down the range of 10.75%-10.70% and the 15.10.30 from an intraday high of 11.13%-11.08%.

The total secondary market Treasury Bond/Bill transacted volume for 25 February was Rs. 40.65 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 7.98% and 8.00% respectively.

The net liquidity surplus stood at Rs. 171.62 billion yesterday. Rs. 1.25 billion was withdrawn from the Central Bank’s SLFR (Standing Lending Facility Rate) of 8.50%, while an amount of Rs. 172.87 billion was deposited at Central Bank’s SDFR (Standard Deposit Facility Rate) of 7.50%.

Forex Market

In the Forex market, the USD/LKR rate on spot contracts closed the day appreciating marginally to Rs. 295.35/295.45 as against 295.65/295.80 the previous day.

The total USD/LKR traded volume for 25 February was $ 59.00 million.

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

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