Secondary Bond market rallies; two-way quotes close down

• T-Bill rates decline at auction for 15th straight week
• Details of Rs. 27.50 b T-bond auction announced
• Foreign holdings in Rupee treasuries steadily increases
• Rupee depreciates slightly

By Wealth Trust Securities

The Secondary Bond market commenced last week slowly with yields holding broadly steady. However, the market quickly shifted gears and experienced a strong rally, driven by aggressive buying interest that pushed yields lower. Notably, robust demand was observed across all tenors, leading to a surge in both activity and transaction volumes. Despite some marginal profit-taking pressure and a moderation in activity at the tail end of the week, two-way quotes closed the week significantly lower.

The yield on the 15.12.26 maturity was seen moving down from an intraweek high of 8.92% to a low of 8.75%. The 01.05.27 maturity was seen hitting a low of 9.25% down from a high of 9.40%. The 15.02.28 and 15.03.28 maturities were seen trading down the range of 10.08%-9.99% collectively. The 01.05.28 and 15.10.28 maturities were seen trading down from intraweek highs to lows of 10.19%-10.07% and 10.37%-10.30% respectively. The 15.09.29 maturity was seen trading from a high of 10.80% to a low of 10.74%. The yield on the 15.10.30 maturity was seen declining down from an intraweek high of 11.25% to an intraweek low of 11.13%.

Similarly, at the weekly Treasury Bill auction conducted last Wednesday, weighted average yields across all three offered maturities declined for the 11th consecutive week. This marks a continued downward trend, with yields on at least one tenor decreasing over the past 15 weeks at auctions. Accordingly, the weighted average rates on the 91-day tenor dropped by 08 basis points to 7.61%, the 182-day tenor by 04 basis points to 7.90% and the 364-day tenor by 06 basis point to 8.36%. Total bids received exceeded the offered amount by 2.38 times, and the entire Rs. 115.00 billion on offer was successfully raised in the first phase in competitive bidding.

In addition, the details of the upcoming Treasury Bond auction, with a total offered amount of Rs. 27.5 billion scheduled for 27 of February (Thursday), have been announced. The auction will be comprised of:

nRs. 15.00 billion: Maturing on 15 June, 2029, with a coupon rate of 11.75%.

nRs. 12.50 billion: Maturing on 15 December, 2032, with a coupon rate of 11.50%.

Meanwhile, the foreign holding in Rupee Treasuries recorded a net inflow for the second consecutive week amounting to Rs. 793.00 million for the week ending 20 February 2025, as a result the total holding notched up to 

Rs. 78.77 billion.

The daily secondary market Treasury Bond/Bill transacted volumes for the first four days of the week averaged at 

Rs. 24.85 billion. 

In money markets, the total outstanding liquidity surplus reduced to Rs. 150.59 billion as at the week ending 21 February, 2025, from Rs. 175.09 billion recorded the previous week. The weighted average interest rates on call money and repo were recorded within the ranges of 7.98%-7.99% and 7.99%-8.01% respectively. 

The Central Bank of Sri Lanka’s (CBSL) holding of Government Securities was registered at Rs. 2,511.92 billion as at 21 February, 2025, unchanged from the previous week’s closing level.

Forex market

In the Forex market, the USD/LKR rate on spot contracts was seen depreciating slightly, to close the week at Rs. 295.65/295.90 as against its previous week’s closing level of Rs. 295.40/295.70 and subsequent to trading at a high of Rs. 295.15 and a low of 

Rs. 297.43.

The daily USD/LKR average traded volume for the first three trading days of the week stood at $ 59.68 million. 

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