Secondary bond market yields drop ahead of Rs. 190 b T-bond auction

• Rs. 102 b T-bill auction fully subscribed; rates drop across board for fifth straight week

By WealthTrust Securities

In the secondary Bond market, renewed buying interest leading to the bill auction resulted in the yield of the liquid maturities of 15.02.28, 15.03.28, 01.05.28, and 01.07.28 decreasing to hit intraday lows of 10.15%, 10.13%, 10.30%, and 10.40%, respectively, against its previous day’s closing levels of 10.18/22, 10.18/25, 10.35/40, and 10.40/44.

In addition, the 15.12.26, 15.01.27, 01.05.27, 15.12.27, 15.10.28, 15.12.28, and 15.09.29 maturities traded at levels of 9.45%, 9.50% to 9.55%, 9.75% to 9.78%, 9.87% to 9.90%, 10.49% to 10.55%, 10.56% and 10.78% to 10.80% as well.

The weighted average rates declined across all three maturities for the fifth consecutive week at its weekly Treasury bill auction conducted yesterday. Accordingly, the weighted average rates on the 91-day tenor dropped by 08 basis points to 8.47%, the 182-day tenor by 12 basis points to 8.60%, and the 364-day tenor by 04 basis point to 8.9%. Total bids received exceeded the offered amount by 2.87 times, and the entire Rs. 102 billion on offer was successfully raised at the first phase in competitive bidding.

The second phase of subscription for 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., 3 p.m. today). 

This comes ahead of the Treasury bond auction due to be held today. The round of auctions will have on offer a total amount of Rs. 190 billion. This will be comprised of Rs. 60 billion from a 15 October 2028 maturity bearing a coupon rate of 11.00%, Rs. 80 billion from a 15 October 2030 maturity bearing a coupon rate of 11.00% and Rs. 50 billion from a 1 November 2033 maturity bearing a coupon rate of 09.00%.

For context, the previous round of Treasury bond auctions conducted on 30 December 2024 managed to successfully raise the entire offered amount of Rs. 80 billion. The total bids received exceeded the offered amount by 2.82 times. In particular, the 15.10.28 maturity (bearing an 11.00% coupon) recorded a resoundingly bullish outcome and was issued at a weighted average yield of 10.42%. Maturity-wise the entire Rs. 45 billion offered was snapped up at the 1st phase of subscription in competitive bidding. This maturity was traded at 10.45% prior to the auction.  A 01.06.33 maturity (bearing a 09.00% coupon) was issued at a weighted average yield of 11.47%. Incidentally, this was the same rate it was issued at the immediately previous auction held on 12 December 2024. However, this maturity raised only 33.23% or Rs. 11.63 billion at the 1st phase in competitive bidding.  This prompted the opening of a second phase which saw the entire maturity-wise offered amount of Rs. 35 billion raised.

The total secondary market Treasury bond/bill transacted volume for 7 January 2025 was Rs. 20.19 billion.

In money markets, the weighted average rates on overnight call money and repo stood at 7.99% and 8.03% respectively.

The net liquidity surplus stood at Rs. 145.50 billion yesterday. Rs. 0.54 billion was withdrawn from the Central Bank’s SLFR (Standing Lending Facility Rate) of 8.50%, while an amount of Rs. 145.50 billion was deposited at the Central Bank’s SDFR (Standard Deposit Facility Rate) of 7.50%. 

Forex market 

In the Forex market, the USD/LKR rate on spot contracts closed the day at Rs. 296.05/296.15 as against its previous day’s closing level of Rs. 296.00/296.30. 

The total USD/LKR traded volume for 7 January 2025 was $ 111.85 million. 

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