Secondary bond market yields see-saw

• Rs. 132.50 b T-bond auction sees strong demand for five-year tenor
• Rupee stable

By Wealth Trust Securities

The Rs. 132.50 billion Treasury bond auction conducted yesterday managed to successfully raise 98.70% or Rs 130.77 billion out of the total offered amount. This was despite total bids received exceeding the offered amount by 2.43 times. 

In particular, the 15.09.29 maturity (bearing a 11.00% coupon) recorded a resoundingly bullish outcome and was issued at a weighted average yield of 10.75%. The entire Rs. 77.50 billion offered was raised at the 1st phase of subscription in competitive bidding. This maturity was observed quoted at 10.70%/10.75% prior to the auction. 

A 01.06.33 maturity (bearing a 09.00% coupon) was issued at a weighted average yield of 11.47%. However, only managing to raise 96.86% or Rs. 53.27 billion out of the maturity specific offered amount of Rs. 55.00 billion across both phases. Notably, this was higher than the weighted average of 11.40% that was recorded at the immediately previous auction held on 28 November on a similar 2033 maturity (01.11.33).

An issuance window for the 15.09.29 maturity is open until close of business of day prior to settlement date (i.e., 4 p.m. on 13.11.2024) at the Weighted Average Yield Rates (WAYRs) determined for the said ISIN at the auction, up to 10% of the respective amounts offered. 

The Secondary bond market yesterday saw activity at elevated levels, with sizeable volumes transacted. Initially, yields continued to decline, nosediving on the back of strong demand, with aggressive buying happening even as the auction was underway. However, following the release of the auction results, yields were pushed back up again due to profit-taking pressure, reversing some gains.

In the early hours of the day, the 15.09.27 maturity was seen changing hands within the range of 9.91%-9.90%. The 15.03.28 maturity initially saw yields hit intraday lows of 10.15%, however post-auction rates were seen moving back up to 10.25%. The other 2028 tenors also broadly followed this trading pattern. The 01.05.28 maturity dropped from an intraday high of 10.37% to a low of 10.20% before moving back up to trade at 10.35%.

Meanwhile, the 15.09.29 auction maturity saw yields drop from a high of 10.85% to a low of 10.75% while the auction was underway. However, it was seen settling at the two-way quote of 10.72%/10.75%. The 15.03.31 maturity was observed trading within the range of 11.30%-11.26%.

The total secondary market Treasury bond/bill transacted volume for 11 December was Rs. 101.47 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 8.01% and 8.15% respectively. The DOD (Domestic Operations Department) of Central Bank abstained from injecting liquidity by way of an overnight and term reverse repo auctions.

The net liquidity surplus stood at Rs. 230.86 billion yesterday. Rs. 0.93 billion was withdrawn from the Central Bank’s SLFR (Standing Lending Facility Rate) of 8.50%, while an amount of Rs. 231.79 billion was deposited at 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 broadly steady with Rs. 290.20/290.35 as against 290.25/290.30 the previous day.

The total USD/LKR traded volume for 11 December was $ 35.08 million. 

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