Secondary Bond market yields decline ahead of Rs. 132.5 b T-bond auction

• Rs. 206 b T-bill auction fully subscribed; rates drop across the board
• Rupee appreciates slightly

By WealthTrust Securities

The secondary Bond market yesterday saw yields decline further on the back of healthy market activity and transaction volumes. However, following the announcement of the T-bill auction results, activity was seen moderating as market participants were seen adopting a wait-and-see approach ahead of the upcoming T-bond auction.

The yield on the 15.02.28 and 15.03.28 maturities were seen declining from 10.37% to 10.30%. The 01.05.28 maturity was seen trading down the range from 10.47%-10.36%, while the 01.07.28 maturity traded down from 10.50%-10.45%. The 15.09.29 maturity was observed trading at the rate of 10.85%. Additionally, trades were observed on the 2027 (i.e. 01.05.27, 15.09.27, and 15.12.27) and 15.05.30 maturities at levels of 9.85%, 9.95%, 10.00%, and 11.07%-11.05%, respectively.

At the weekly Treasury bill auction conducted yesterday (11 December), weighted average rates declined across all three maturities. Accordingly, the weighted average rates on the 91-day tenor dropped by four basis points to 8.69%, the 182-day tenor by six basis points to 8.88%, and the 364-day tenor by one basis point to 9.07%. Total bids received exceeded the offered amount by 2.27 times, and the entire Rs. 206 billion on offer was successfully raised at the first phase.

The second phase of subscription for the auction will be opened across all three tenors at the weighted average rates until close of business of the day prior to settlement (i.e., 4 p.m. on 12.12.2024).

This comes ahead of the Rs. 132.50 billion round of Treasury bond auctions due to be held today (12 December).

The auction will be comprised of:

• Rs. 77.50 billion: Maturing on 15 September 2029, with a coupon rate of 11.00%.
• Rs. 55 billion: Maturing on 1 June 2033, with a coupon rate of 9.00%.

For context, the immediately preceding round of Treasury bond auctions, with a total offered amount of Rs. 205 billion held on 28 November, achieved an impressive result. Total bids exceeded the offered amount by 2.37 times and all maturities were fully subscribed in the first phase through competitive bidding:

• 15.10.28 (11.00 % coupon): Rs. 80 billion raised at the weighted average rate of 10.62%.
• 15.03.31 (11.25% coupon): Rs. 75 billion raised at the weighted average rate of 11.28%.
• 01.11.33 (9.00% coupon): Rs. 50 billion raised at the weighted average rate of 11.40%.

The total secondary market Treasury bond/bill transacted volume for 10 December was Rs. 16.39 billion.

In money markets, the weighted average rates on overnight call money and repo stood at 8.01% and 8.07%, respectively.

The DOD (Domestic Operations Department) of the Central Bank abstained from conducting any auctions yesterday. 

The net liquidity surplus stood at Rs. 234.79 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. 236.04 billion was deposited at the 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 slightly to Rs. 290.25/290.30 against its previous day’s closing level of Rs. 290.30/290.35. 

The total USD/LKR traded volume for 10 December was $ 92.78 million. 

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