Secondary bond market yields stabilise

• Rs. 190 b T-Bill auction in spotlight
• Rupee advances further

By Wealth Trust Securities 

The secondary bond market saw yields consolidate at existing levels, to close the day broadly steady. Trading activity was witnessed mostly during the earlier part of the day and centred predominantly on 2026 to 2029 durations. The 2026 tenor 01.02.26 and 01.06.26 maturities were observed transacting at the rate of 10.55% and 10.70% respectively, on relatively thin volumes. The 01.05.28 maturity was seen trading on relatively large volumes at the rate of 12.00%. Additionally, trades were observed on the 15.09.29 and 15.05.30 at levels of 12.15% and 12.20% respectively.

In the secondary Treasury bill market, significant interest was also observed. Particularly on short term bills, with September/October 2024 (close to three months) maturities trading on considerable volumes down the range from 10.05% down to lows of 9.95%. 

The Treasury bill auction scheduled for today will offer a total volume of Rs. 190.00 billion, an increase of Rs. 30.00 billion from the previous week. This will consist of Rs. 50.00 billion on the 91-day maturity, Rs. 90.00 billion on the 182-day and Rs. 50.00 billion on the 364-day maturities.

For context, at last Wednesday’s Treasury bill auction (26/06/24), yields were seen increasing steeply, for a fourth consecutive week. The yield for the 91-day maturity jumped by 68 basis points to 10.07%, the 182-day maturity by 38 basis points to 10.19%, and the 364-day maturity by 41 basis points to 10.31%. As such rates across all three maturities were seen moving above 10% for the first time since 17 April 2024.

The total secondary market Treasury bond/bill transacted volume for 1 July was Rs. 16.17 billion.

In money markets, the weighted average rate on overnight call money was at 8.78% and repo was at 9.11%.

The net liquidity surplus stood at Rs. 47.12 billion yesterday as an amount of Rs. 2.97 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 9.50% against an amount of Rs. 117.09 billion been deposited at Central Banks SDFR (Standard Deposit Facility Rate) of 8.50%. 

Further, the DOD (Domestic Operations Department) of Central Bank injected liquidity by way of an overnight and term reverse repo auction for Rs. 17.00 billion and Rs. 50.00 billion at the weighted average rate of 8.75% and 8.93% respectively.

Forex Market 

In the Forex market, the USD/LKR rate on spot contracts closed the day further appreciating to Rs. 303.10/303.30 against the previous day’s closing level of Rs. 304.80/305.00.

The total USD/LKR traded volume for 1 July was $ 58.80 million.

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