Sunday Sep 29, 2024
Sunday Sep 29, 2024
Monday, 29 April 2024 01:00 - - {{hitsCtrl.values.hits}}
By Wealth Trust Securities
The secondary bond market commenced the week ending 26 April 2024 on a dull note, with yields initially moving sideways on subdued activity. However, as the week unfolded, momentum picked up significantly, marked by a surge in buying interest that drove yields down. Trading continued to be predominantly on the short end of the yield curve with a particular emphasis on 2026 to 2028 durations, with healthy transaction volumes overall.
Accordingly, the yield on the liquid 2026 tenor of 15.12.26 was seen nose-diving to an intraweek low of 11.18% from its intraday high of 11.35% on the back of robust demand. Similarly, the relatively shorter 2026 tenors of 15.05.26 and 01.08.26 were seen trading within the range of 11.20% to 11.05%. Likewise, the liquid 2027 tenors of 01.05.27 and 15.09.27 were seen declining to intraweek lows of 11.60% from intraweek highs 11.85%. The popular 15.03.28 tenor saw frenzied buying in particular, which led it to its yield dropping to an intraweek low of 11.91%, down from its opening highs of 12.15%. This interest was also reflected on the other 2028 tenors of 01.05.28, 01.07.28 and 15.12.28 which changed hands within the range of 12.20% down to 11.95%. Additionally, trades were observed on the short tenor 15.01.25 and 01.07.25 at the rates of 10.15% and 10.30% respectively as well.
At the close of the week two-way quotes were seen dropping across the board, however more pronounced on the short tenors which resulted in a notable steepening of the yield curve. The bullish sentiment was carried over from the impressive outcome at the weekly Treasury Bill auction and ahead of the upcoming Rs. 100 billion Treasury bond auctions.
At the weekly Treasury bill auction conducted last Wednesday (24 April 2024), the weighted average yields were seen decreasing across all three tenors for a third consecutive week. The 91-day maturity reduced by 13 basis points to 9.90%, while the 182-day maturity decreased by 14 basis points to 10.08% and the 364-day maturity dropped by 02 basis point to 10.21%. The entire offered amount of Rs. 92.00 billion was taken up at the 1st phase, with total bids received exceeding the total offered amount by 2.33 times. In addition, a further Rs. 9.20 billion was raised at the 2nd phase across all three maturities which was the maximum offered amount out a total market subscription of Rs. 88.05 billion.
The Treasury bond auctions due today (29 April), will have on offer Rs. 100 billion. The auction will comprise of Rs. 25 billion from a bond due on 15 March 2028 bearing a coupon of 10.75%, Rs. 30 billion from a bond due on 15 May 2030 bearing a coupon of 11.00% and Rs. 45 billion from a bond due on 1 October 2032 with a coupon rate of 9.00%.
For context, the last round of Treasury bond auctions held on the 8 April, produced mixed results. Initially, the auction was undersubscribed, with only Rs. 38.43 billion raised at the 1st phase in competitive bidding. However, by the conclusion of the second phase, the entire amount of
Rs. 85.00 billion was successfully raised, issued at the weighted averages determined at the 1st phase across all three maturities. As a result, the total bids received exceeded the offered amount by 3.53 times. In terms of yields, the 15.12.26 maturity was issued at a weighted average rate of 11.44%, 15.09.29 maturity at 12.37% and the 01.10.32 maturity at 12.51%.
Meanwhile, the foreign holding in Rupee bonds and bills for the week ending 25 April 2024 recorded a net outflow, amounting to Rs 4.43 billion. As a result, the total holding decreased to Rs. 84.84 billion.
The daily secondary market Treasury bond/bill transacted volumes for the first four days of the week averaged at Rs. 18.87 billion.
In money markets, the total outstanding liquidity surplus increased considerably of Rs. 109.29 billion by the week ending 26 April from its previous week’s surplus of Rs. 43.03 billion, to the highest level since March 2023. The Domestic Operations Department (DOD) of Central Bank continued to inject liquidity during the week by way of overnight and term reverse repo auctions at weighted average yields ranging from 8.54% to 8.75%. The CentralBank of Sri Lankas (CBSL) holding of Government Securities was registered at
Rs. 2,675.62 billion as at 26 April 2024, unchanged from its previous week’s level.
Forex Market
In the Forex market, the USD/LKR rate on spot contracts was seen appreciating significantly during the week to close at Rs. 296.00/296.30. This is as against its previous weeks closing level of Rs. 302.00/302.50 and subsequent to trading at a high of Rs. 295.96 and a low of Rs. 302.00.
The daily USD/LKR average traded volume for the first four trading days of the week stood at $ 59.02 million.
(References: Central Bank of Sri Lanka, Bloomberg E-Bond trading platform, Money
broking companies)
