Secondary bond market on a roll

• Bullish outcome at Rs. 120 b Treasury bill auction
• Rupee appreciates drastically

By Wealth Trust Securities

The secondary bond market yesterday continued on a bull run, rallying for the third consecutive day. Strong buying interest pushed yields to fresh lows on the back of heightened market activity and sizeable transaction volumes.

Accordingly, yields on the 2028 tenors, specifically the liquid 15.02.28 maturity dropped to an intraday low of 12.35%, down from an intraday high of 13.00%. Similarly, the yield on the popular 15.06.29 and 15.09.29 maturities declined from 13.15% to 12.45% and 12.90% to 12.50% respectively, intraday. The shorter tenors 15.05.26, 01.06.26 and 15.12.26 traded lower, ranging down from 11.20% to 10.90%. The 15.09.27 and 15.12.27 maturities saw yields decline from 12.50% to 12.00%. Additionally, trades were observed on the medium tenor 01.10.32 maturity trading down from an intraday high of 13.00% to a low of 12.85%. 

This coincided with the news that Fitch Ratings has affirmed Sri Lanka’s Long Term Foreign-Currency Issuer Default Rating (IDR) at ‘RD’ (Restricted Default) and Long-Term Local-Currency IDR at ‘CCC-’, noting significant progress regarding the restructuring of the nation’s foreign debt obligations.

Meanwhile, the Treasury Bill auction conducted yesterday reflected the enthusiasm in the secondary market, with yields on the shorter tenure 91-day and 182-day maturities either declining or holding steady for the first time after having been on an upward trajectory for a period of eight weeks prior. Accordingly, the rate on the 91-day tenor held steady at 10.49%, the 182-day tenor dropped by 04 basis points to 10.72%. The 364-day tenor declined by 02 basis points to 10.05%. The bids received exceeded the offered amount by two times and the entire Rs. 120 billion amount offered was raised successfully.

The second phase of 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., 4.00 pm on 26.09.2024).

Given below are the details of the auction;

The total secondary market Treasury bond/bill transacted volume for 24 September was Rs. 20.81 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 8.62% and 8.92% respectively. The DOD (Domestic Operations Department) of Central Bank injected liquidity by way of overnight and 7-day reverse repo auctions for a total volume of Rs. 115.00 billion at weighted average rates of 8.62% and 8.93% respectively.

The net liquidity stood at a deficit of Rs. 28.45 yesterday. An amount of Rs. 12.47 billion was withdrawn from the Central Banks SLFR (Standing Lending Facility Rate) of 9.25% as against an amount of Rs. 99.02 billion deposited at Central Banks SDFR (Standard Deposit Facility Rate) of 8.25%. 

Forex Market

 In the Forex market, the USD/LKR rate on spot contracts appreciated sharply to close the day at Rs. 300.30/300.80 against its previous day’s closing level of Rs. 303.00/303.15.

The total USD/LKR traded volume for 24 September was $ 57.80 million. 

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