Secondary bond market rallies on renewed enthusiasm

• Rs. 120 b T-bill auction fully taken up
• Rupee depreciates; closes over 300

By WealthTrust Securities

The secondary bond market saw a resurgence in buying interest which led to the market rallying during the early hours of trading yesterday. As a result, yields were seen declining on the back of increased activity and healthy volumes transacted.

Accordingly, the yield on the 15.12.27 maturity was seen declining to 11.90% against its previous day’s closing level of 11.95/12.05. Similarly, the 2028 tenors saw strong demand with the yield on the 15.03.28, 01.07.28, and 15.12.28 maturities declining considerably from intraday highs of 12.60%, 12.72%, and 12.85% respectively to lows of 12.50% each, and 12.70%. The 15.06.29 maturity saw its yield decline from 12.95% to 12.90%. Additionally, trades were observed on the medium tenor 15.05.30 maturity, which saw rates decline from 13.10% to 13.00%.

Meanwhile, the Treasury bill auction conducted yesterday exhibited mixed results. The weighted average yields on the shorter tenor securities were seen increasing for the second consecutive week. Accordingly, the rate on the 91-day tenor increased by 3 basis points to 9.42% and the 182-day tenor by 12 basis points to 9.80%. In contrast, the 364-day tenor saw its weighted average dip marginally by 2 basis points to 10.01%, declining for the second week.  

Despite these varied outcomes, the entire Rs. 120.00 billion on offer was raised at its first phase. The total bids received exceeded the offered amount by 1.94 times.

The bulk of the funds raised were from the shorter tenors, with 99% of the total accepted amount attributable to the 91- and 182-day tenors. In particular, maturity-wise, the 91- and 182-day raised more than their respective offered amounts, while the take up on the 364-day maturity was below the offered amount.

The second phase of the auction will be opened on 182-day and 364-day maturities at its weighted average rates until close of business of the day prior to settlement (i.e., 4 p.m. on 22.08.2024).

The total secondary market Treasury bond/bill transacted volume for 20 August was Rs. 2.55 billion.

In money markets, the weighted average rates on overnight call money and repo were 8.60% and 8.73% respectively.

The net liquidity surplus stood at Rs. 82.18 billion yesterday as an amount of Rs. 127.58 billion was deposited at the Central Bank’s SDFR (Standing Deposit Facility Rate) of 8.25%, as against an amount of Rs. 5.40 billion been withdrawn from the Central Bank’s SLFR (Standing Lending Facility Rate) of 9.25%. The DOD (Domestic Operations Department) of the Central Bank injected liquidity by way of an overnight reverse repo auction for Rs 40.00 billion at the weighted average rate of 8.59%.

Forex market 

In the Forex market, the USD/LKR on spot contracts closed the day depreciating to 

Rs. 300.20/300.60 against its previous day’s closing level of 

Rs. 299.60/300.00. 

The total USD/LKR traded volume for 20 August was $ 44.55 

million.

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