Secondary Bond market continues to rally

• Weekly Bill auction fully subscribed
• Averages continue to slide
• Rupee down

By Wealth Trust Securities

The secondary bond market continued to rally yesterday with sustained activity. Aggressive buying interest was seen pushing down yields further, with considerable volumes transacted. This was against the backdrop of news that the ADB was looking to provide $ 400 million in funding and that Sri Lanka’s official creditor committee have reached an agreement to restructure around $ 5.9 billion, which is expected to facilitate approval by the IMF Executive Board of the first review of Sri Lanka’s program allowing for next tranche of about $ 330 million in financing as well.

Trades were observed on the following maturities of the three 26’s (15.05.26, 01.06.26, 01.08.26), three 27’s (15.01.27, 01.05.27, 15.09.27), two 28’s (01.05.28 and 01.07.28), 01.07.32 within the ranges of 14.45% to 14.15%, 14.50% to 14.20%, 14.50% to 14.40% and 14.40% to 14.30%.

This week’s Treasury bill auction conducted yesterday, received a positive response once again as weighted average yields decreased across the board. The 91-day and 182-day bills saw the most demand, which led to its weighted average yield declining by 43 basis points and 23 basis points respectively to 14.86% and 14.52% while receiving bids of Rs. 117.85 billion and Rs. 131.23 billion against offered amount of Rs. 60.00 billion and Rs. 70.00 billion respectively. The 364-day bills also declined by 05 basis points to record a weighted average of 12.89%. The total bids received was 1.82 times greater than the total offered amount.

The entire offered amount of Rs. 160 billion was raised at the 1st phase of the auction. The 2nd phase of subscription, for only the 91-day and 364-day maturities will be opened until 4:00 p.m. on the day before the settlement date (i.e., 30.11.2023) at the weighted averages determined at the 1st phase of the auction. Given below are the details of the 1st phase of the auction:

The total secondary market Treasury bond/bill transacted volume for 28 November 2023 was Rs. 17.58 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 9.25% and 9.83% respectively while the net liquidity deficit stood at Rs. 28.84 billion yesterday.

The DOD (Domestic Operations Department) of Central Bank injected liquidity by way of an overnight auction for Rs. 7.06 billion at the weighted average rates of 9.15%. An amount of Rs. 33.31 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 10.00% while an amount of Rs. 11.53 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. 328.25/328.50 against its previous day’s closing level of Rs. 329.35/329.50.

The total USD/LKR traded volume for 28 November was $ 47.52 million.

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