Second Bond Buy-Back auction for the week

• Secondary Bond Market Volatile
• NCPI +2.8% YOY in November

By Wealth Trust Securities

The secondary bond market saw activity remain somewhat subdued. With yields edging down initially were seen reversing gains during the day to close marginally up. This was against the backdrop of the second consecutive Bond Buy-Back auction in a week, after a hiatus of almost one year preceding. Where an amount of Rs. 2.77 billion was repurchased on 01.06.26 and 15.01.27 maturities at the weighted average rate of 13.70% on both.

Trading continued to be seen mostly on the short to medium tenors. Accordingly, trades were seen on the selected maturities of 01.06.25, two 26’s (01.06.26 and 01.08.26), 15.01.27 and 01.07.28 changing hands at levels of 13.50%, 13.70% to 13.80%, 13.75%, and 14.05% respectively on relatively thin volumes.

Meanwhile, in secondary market bills, January and March 2024 maturities traded at 13.50% and 14.29% to 14.14% respectively.

On the inflation front, the National Consumer Price Index -NCPI (Base: 2021=100) or National inflation for the month of November was recorded at 2.80% on its point to point as against 1.00% recorded in October. This is the second instance that inflation has accelerated marginally, after steadily and rapidly declining from the peak of 53.60% in February, since the index was rebased at the start of the year 2023.

In line with Central Bank of Sri Lanka’s projections. The central bank had earlier expressed the view that the disinflation trend might reverse due to increased energy tariffs and higher taxes, but it anticipates price increases stabilising at a 5% target in the medium term.

The total secondary market Treasury bond/bill transacted volume for 20 December was Rs. 61.69 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 9.16% and 9.56% respectively while the net liquidity stood at a deficit of Rs. 84.16 billion yesterday.

The DOD (Domestic Operations Department) of Central Bank injected liquidity by way of an overnight Repo auction for Rs. 43.10 billion at the weighted average rates of 9.08%. An amount of Rs. 42.31 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 10.00% while an amount of Rs. 1.25 billion was deposited at its SDFR (Standard Deposit Facility Rate) of 9.00%.

Forex Market 

In the Forex market, the USD/LKR rate on spot contracts traded within the range of Rs.326.00 to Rs.326.85 yesterday against its previous day’s closing of Rs.326.75/326.85 and closed the day at Rs.326.25/326.40.

The total USD/LKR traded volume for 20 December was $ 65.95 million. 

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