Secondary Bond market yields increase

Tuesday, 1 April 2025 02:24 - - {{hitsCtrl.values.hits}}

T-bill yields hold static at auction; end 19-week streak of declines
Foreign holdings in Rupee treasuries increases
Total outstanding liquidity increases
Rupee appreciates

By Wealth Trust Securities

The Secondary Bond market last week saw rates move up, driven by selling interest following the monetary policy announcement. The Central Bank decided to maintain the Overnight Policy Rate at the second Monetary Policy Review for 2025 announced last Wednesday. This marked the second consecutive review where all key rates remained unchanged since the Overnight Policy Rate was introduced. Adding to the upward pressure was a wave of profit-taking, which reversed some of the gains recorded during the prior week’s bull run. However, bouts of renewed buying interest kicked in at the elevated levels curtailing further upwards movement. Despite the shift in sentiment, market activity and transaction volumes remained at healthy levels.

Accordingly, the yield on the 15.09.27 maturity increased from 9.25% to 9.55%. The 15.03.28 maturity was seen trading up the range of 9.73%-10.00%. The 15.10.28 maturity traded up from an intraweek low of 9.80% to a high of 10.20%. The 15.09.29 and 15.12.29 maturities also traded up from intraweek lows to highs of 10.00%-10.40% and 10.12%-10.45% respectively. The 15.10.30 maturity traded up from 10.10%-10.48% and the 15.12.32 from 10.70%-10.85%.

At the weekly Treasury Bill auction held last Wednesday, weighted average yield rates were seen remaining unchanged for the first time in 19 weeks. Accordingly, the weighted average rates were recorded at 7.50% on the 91-day tenor, 7.84% on 182-day tenor and 8.25% on the 364-day tenor. The auction went undersubscribed with only 73.01% or Rs. 73.38 billion of the total Rs. 100.50 billion amount offered. This was despite total bids received exceeding the offered amount by 1.81 times.

The foreign holding in Rupee Treasuries recorded a net inflow for the third consecutive week for the week ending 21 March amounting to Rs. 1.41 billion, and as a result the total holding rose to Rs. 94.77 billion.

The daily secondary market Treasury Bond/Bill transacted volumes for the first four days of the week averaged at Rs. 19.43 billion.

In money markets, the total outstanding liquidity surplus increased to Rs. 184.26 billion as at the week ending 28 March from Rs. 155.98 billion recorded the previous week. The weighted average interest rates on call money and repo were recorded within the rates of 7.95% and 7.97%-7.98% respectively.

The Central Bank of Sri Lanka’s (CBSL) holding of Government Securities was registered at Rs. 2,511.92 billion as at 28 March, unchanged from the previous week’s closing level.

Forex Market

In the Forex market, the USD/LKR rate on spot contracts was seen appreciating marginally, to close the week at Rs. 296.25/296.35 as against its previous week’s closing level of Rs. 296.60/295.80 and subsequent to trading at a high of Rs. 296.29 and a low of Rs. 296.90.

The daily USD/LKR average traded volume for the first four trading days of the week stood at $ 83.86 million.

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

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