Secondary bond market remains active; yields broadly steady

• T-Bill rates decline at auction for 17th straight week
• Foreign holdings in Rupee Treasuries records net outflow
• Total outstanding liquidity decreases; rupee depreciates marginally

By Wealth Trust Securities

The secondary bond market commenced the week ending 7 March on a positive note following the disbursement of the fourth tranche of the IMF EFF program. Initially, this resulted in strong concentrated demand specifically on the 2029 and 2030 tenors which saw yields edge down. However, the rest of the yield curve held steady. Following this, yields continued to consolidate throughout the week as sideways trading was observed along most of the yield curve. Market activity and transaction volumes were observed at healthy levels throughout. At the tail-end of the week some selling pressure was observed causing yields to edge up specifically on the 2028 tenors. As a result, the yield curve was observed flattening at the end of the week. In conclusion two-way quotes closed up on the 2028 tenors, down on the 2030 tenors but broadly steady along the rest of the yield curve. 

The yield on the 15.12.26 maturity held steady and traded within at the rate of 8.75%. The 01.05.27 maturity saw trades within the range of 9.25%-9.20%. The 01.07.28 and 15.10.28 bonds were seen trading up the ranges of 10.18%-10.21% and 10.34%-10.38% respectively intraweek. The 15.09.29 maturities traded within the range of 10.72%-10.75%.

The 15.10.30 maturity was seen trading down from an intraweek high of 11.07% to a low of 10.97%. Trades were witnessed on the 01.10.32 maturity within the range of 11.46%-11.45%.

At the weekly Treasury Bill auction conducted last Wednesday, weighted average yields across all three offered maturities declined for the 13th consecutive week. This marks a continued downward trend, with yields on at least one tenor decreasing over the past 17 weeks. Accordingly, the weighted average rates on the 91-day tenor dropped by 4 basis points to 7.53%, the 182-day tenor by 1 basis point to 7.86% and the 364-day tenor by 1 basis point to 8.34%. Total bids received exceeded the offered amount by 1.90 times, and the entire Rs 167.00 billion on offer was successfully raised in the first phase in competitive bidding.

The details of the upcoming Rs. 210.00 billion Treasury Bond auction scheduled to be held on 12 March were announced. The auction will be comprised of:

• Rs. 85.00 billion from a 15 December 2029 maturity bearing a coupon rate of 11.00%
• Rs. 75.00 billion from a 15 December 2032 maturity bearing a coupon rate of 11.50%
• Rs. 50.00 billion from a 15 September 2034 maturity bearing a coupon rate of 10.25%

The settlement for which will be held on 17 March 2025.

Meanwhile, the foreign holding in Rupee Treasuries recorded a net outflow for the week ending 6 March 2025 amounting to Rs. 1.49 billion, and as a result the total holding notched down to Rs. 78.94 billion.

The daily secondary market Treasury bond/bill transacted volumes for the first four days of the week averaged at Rs. 30.16 billion. 

In money markets, the total outstanding liquidity surplus decreased to Rs. 166.80 billion as at the week ending 7 March, from Rs. 172.65 billion recorded the previous week. The weighted average interest rates on call money and repo were recorded within the rates of 7.98% and 7.99%-8.02% respectively. 

The Central Bank of Sri Lanka’s (CBSL) holding of Government Securities was registered at Rs. 2,511.92 billion as at 7 March, unchanged from the previous week’s closing level.

Forex market

In the Forex market, the USD/LKR rate on spot contracts was seen depreciating marginally, to close the week at Rs. 295.40/295.50 as against its previous week’s closing level of Rs. 295.27/295.30 and subsequent to trading at a high of Rs. 295.15 and a low of Rs. 296.00.

The daily USD/LKR average traded volume for the first four trading days of the week stood at $ 80.54 million. 

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