Saturday Sep 28, 2024
Saturday Sep 28, 2024
Monday, 18 September 2023 02:35 - - {{hitsCtrl.values.hits}}
By Wealth Trust Securities
The week ending 15 September saw some major developments.
Firstly, the Finance Ministry in an official press release announced to eligible holders the acceptance of offers made by the republic pursuant to the invitation to participate in the bond exchange as part of the Domestic Debt Optimisation (DDO) program.
As per the Ministry of Finance, the percentage of the aggregate outstanding principal amount of Eligible Bonds held by Superannuation Funds as of end June 2023 for which valid offers have been accepted by the republic is approximately 84%. This amounts to approximately Rs. 3.2 trillion. This signals the conclusion of the DDO program by way of the announcement made by the Central Bank of Sri Lanka on Tuesday that the EPF and other superannuation funds have accepted the bond swap.
Official data showed that the year-on-year GDP growth rate for the second quarter of the year 2023 was reported at a 3.1% decline. However, this is a significant improvement from the 11.50% contraction seen in the first quarter of the year.
The secondary market bond yields plummeted last week, in comparison to its previous week’s closing levels. This was on the back of the news that the domestic debt optimisation bond swap program has been finalised and on the bullish outcome at the week’s bond and bill auctions. As such, active trading saw the yields on the liquid bond maturities of 01.08.26 and 01.07.28 reach intraweek lows of 14.00% and 13.40% respectively by the end of last week as against its opening week’s highs of 15.80% and 14.65% while it led to a parallel shift down of the overall yield curve.
Additionally, last Friday witnessed heavy buying interest in secondary market bills, centring on February and March 2024 maturities that changed hands at levels of 15.00% to 15.40%.
The daily secondary market Treasury bond/bill transacted volumes for the first three days of the week averaged at Rs. 29.72 billion.
The outcome of the Treasury bond auctions conducted on Tuesday was a bullish one as its total offered amount of Rs. 90 billion was successfully taken up at the 1st phase of the auction and a further Rs. 18 billion was raised, being the maximum available, at the direct issuance window. Weighted averages decreased in comparison to the round of bond auction conducted on 28 August.
Furthermore, in total an amount of Rs. 198.55 billion (at the 1st and 2nd phase) was raised at the weekly Treasury bill auction as against its total offered amount of Rs. 160.00 billion while weighted average yields declined across the board. The 91-day, 182-day and 364- day bills witnessed declines of 30, 23 and 17 basis points. As such the tenures recorded weighted averages of 18.16%, 15.19% and 13.35% respectively.
The foreign holdings of Rupee Treasuries saw a net outflow of Rs. 1.95 billion, breaking a two-week streak of net inflows. This brings the total T-bills and T-bonds held by foreigners to Rs. 162.59 billion for the week ending 14 September.
In money markets, 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 11.32% to 14.18%. The Central Bank of Sri Lanka’s (CBSL) holding of Government Securities was registered at Rs. 2,556.62 billion against its previous week’s of Rs. 2,556.54 billion.
This week saw the total outstanding liquidity in the money market record a surplus of Rs. 1.02 billion against a deficit of Rs. 2.22 billion for the previous week.
In the forex market, the USD/LKR rate on spot contracts was seen depreciating during the week to close the week at Rs. 323.25/323.75 against its previous week’s closing level of Rs. Rs. 321.75/322.00, subsequent to trading at a low of Rs. 323.50 and a high of Rs. 322.25.
The daily USD/LKR average traded volume for the first four trading days of the week stood at $ 24.48 million.
(References: Central Bank of Sri Lanka, Bloomberg E-Bond trading platform, Money broking companies)
