Sunday Oct 13, 2024
Sunday Oct 13, 2024
Monday, 7 October 2024 01:23 - - {{hitsCtrl.values.hits}}
By Wealth Trust Securities
The Secondary bond market during the trading week ending 4 October, started off slow but quickly picked up momentum and rallied midweek. Strong buying interest was observed pushing yields lower on the back of healthy activity and transaction volumes. However, profit taking pressure at the tail-end of the week caused the bond market to reverse some gains. As a result, bond yields closed broadly steady on a week-on-week basis.
Accordingly, yields on the 2028 tenors, specifically the liquid 15.02.28 dropped to an intraweek low of 11.45%, down from an intraweek high of 11.95%. Subsequently, as market participants looked to book profits the maturity was seen moving back up to trade at 11.70% at the close of the week. This pattern was observed across the yield curve. The 01.07.28 maturity followed suit and traded down from an intraweek high of 12.00% to a low of 11.55%, but subsequently rebounded to 11.72%. The 15.06.29 dropped from 12.00% to 11.70% before closing at 11.85%. The shorter tenor 01.06.26 saw its yield drop from 10.85% to 10.40% but moved back up to 10.50% at the close of the week. The 2027 tenor 15.12.27 maturity saw yields decline from 11.60% to 11.25%, before moving back up to 11.55%. Additionally, trades were observed on the medium tenor 15.05.30 maturity with its yield remaining relatively stable and trading within the range of 12.24% to 12.10%.
Meanwhile, last week’s Treasury bill auction reflected the enthusiasm in the secondary bond market and recorded a bullish outcome. Yields were seen declining sharply on the 91 day and 182-day tenors. The weighted average rate for the 91-day tenor dropped by 43 basis points to 10.06%, while the 182-day tenor decreased by 35 basis points to 10.37%. The 364-day tenor saw a marginal decline of 1 basis point, bringing the rate to 10.04%. Total bids received exceeded the offered amount by more than two-fold, and the full Rs. 142.50 billion on offer was successfully raised at its 1st phase. The 2nd phase saw heavy demand, with the entire Rs. 14.25 billion on offer snapped up, which received a colossal Rs. 145.41 billion in demand.
As such, the yield curve recorded a notable downward shift on the T-bill section however remained mostly unchanged on the T-bond section.
For the week ending 3 October 2024, the foreign holdings in Sri Lankan rupee-denominated Treasury securities saw a sizeable net inflow of Rs. 4.40 billion, the largest in almost 1 year. This marked the third consecutive week of positive inflows, bringing total foreign holdings to Rs. 43.79 billion, an increase of 11.16% week-on-week.
The daily secondary market Treasury bond/bill transacted volumes for the first four days of the week averaged at Rs. 22.85 billion.
In money markets, the total outstanding liquidity increased to Rs. 35.92 billion by the week ending 4 October, from Rs. 27.43 billion the previous week. The Domestic Operations Department (DOD) of Central Bank injected liquidity during the week by way of overnight reverse repo auctions and a 7-day term reverse repo auctions at weighted average rates of 8.38% to 8.87%. The weighted average interest rate on call money and repo ranged between 8.64% to 8.65% and 8.74% to 8.79% respectively.
The Central Bank of Sri Lankas (CBSL) holding of Government Securities was registered at Rs. 2,515.62 billion as at 4 October 2024, unchanged from the previous week’s level.
Forex Market
In the Forex market, the USD/LKR rate on spot contracts was seen appreciating during the week to close the week at Rs. 294.00/294.35 against its previous week’s closing level of Rs. 298.70/298.90 and subsequent to trading at a high of Rs. 293.40 and a low of Rs. 298.60.
The daily USD/LKR average traded volume for the first four trading days of the week stood at $ 99.94 million.
(References: Central Bank of Sri Lanka, Bloomberg E-Bond trading platform, Money broking companies)
