Rs. 87.50 Treasury bond auction fully subscribed; outcome bullish

• Secondary bond market rallies
• Rupee appreciates 

By WealthTrust Securities

The round of Treasury Bond auctions conducted yesterday successfully raised the entire Rs. 67.50 billion on offer across both phases with a bullish outcome. The total bids received exceeded the offered amount by a staggering 2.75 times. This mirrored both the bullish outcome at the Treasury Bill auction conducted the day before and the bullish sentiment in the secondary bond market. 

In particular, the 01.09.28 maturity (11.50% coupon) recorded a resoundingly bullish outcome and was issued at a weighted average yield of 10.31%. This was below market expectations as the 01.09.28 maturity was seen quoted at the two-way rate of 10.30%/10.35% prior to the auction and a similar 01.07.28 maturity was seen quoted 10.29%/10.32%. Maturity-wise the entire Rs 37.50 billion offered was snapped up at the first phase of subscription in competitive bidding. 

The medium tenor 15.10.30 maturity (11.00% coupon) was issued at the weighted average rate of 11.23%. The maturity raised 98.08% or Rs. 29.42 billion at the first phase in competitive bidding. This led to the opening of the second phase which raised the balance, leading to full subscription of the entire Rs. 30.00 billion offered. This was also below market expectations as the maturity was observed quoted at the market two-way rate of 11.25%/11.30% prior to the auction. The 15.10.30 maturity was previously issued at the same weighted average rate at its auction held on 9 January. 

An issuance window for the 01.09.28 maturity is open until close of business of day prior to settlement date (i.e., 3 p.m. on 14.02.2025) at its Weighted Average Yield Rate (WAYR), up to 10% of the amount offered.

Meanwhile, the secondary bond market yesterday rallied with aggressive buying interest pushing yields lower. Trading activity and transaction volumes were seen at elevated levels. The market saw strong demand even as the Treasury Bond auction was underway. 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 dropped down to a low of 9.00%. The 15.02.28 and 15.03.28 maturities were observed trading at the rates of 10.08% and 10.14%-10.10% respectively. The medium tenor 01.07.28 and 15.10.2028 maturities dropped from intraday highs to lows of 10.32%-10.27% and 10.40%-10.33% respectively. The 15.12.28 maturity was seen trading within the range of 10.43%-10.40%. The 15.09.29 maturity saw its yield decline down the range of 10.85%-10.80%. The 15.10.30 maturity saw its yield drop from an intraday high of 11.28% to a low of 11.20%. 

The total secondary market Treasury bond/bill transacted volume for 11 February was Rs. 49.82 billion. 

In money markets, the weighted average rates on overnight call money and Repo stood at 7.99% and 8.03% respectively. 

The net liquidity surplus stood at Rs. 171.55 billion yesterday. Rs. 1.67 billion was withdrawn from the Central Banks SLFR (Standing Lending Facility Rate) of 8.50%, while an amount of Rs. 173.22 billion was deposited at Central Banks 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 to Rs. 295.90/296.20 as against 296.80/297.00 the previous day. The total USD/LKR traded volume for 11 February was $ 60.05 million.

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