Sporadic activity in bond markets: Yields continue to edge up

• Primary bill rates continue to increase
• Primary bond auctions in focus
• Money market liquidity improves

By Wealth Trust Securities

In the secondary bond market, the bearish to negative sentiment continued during the week ending 10 September, as yields continued to increase on the back of sporadic activity. Selling interest across the curve led to yields on the maturities of 15.03.23, 01.12.24, 15.01.26, 01.05.29, 15.05.30, and 15.09.34 increasing to highs of 6.80%, 8.27%, 9%, 10.23%, 10.10%, and 10.45%, respectively. The yield on the 2026 maturity was last seen trading at 9% in April 2020 while the 2029 to 2034 maturities were traded above 10% in March 2020. 

The weighted average yields at the weekly Treasury bill auctions continued to increase, with the 91-day and 364-day maturities increasing above 6% for the first time since 17 June 2020. Furthermore, the auction went undersubscribed for an eighth consecutive week, as only 48.10% was accepted in total against a total offered amount.

The Treasury bond auctions scheduled for today will see in total an amount of Rs. 50 billion on offer, consisting of Rs. 22.5 billion of the 15.06.2024 maturity and Rs. 27.5 billion of the 15.03.2031 maturity. Maximum yield rates for acceptance were published as 8.10% and 10.10%, respectively. The total accepted amount at the bond auctions conducted on 30 August 2021 for the maturities of 01.09.2023 and 15.10.2025 was a meagre 8% of its total offered amount while the weighted average rates were recorded at its stipulated cut off rates of 6.75% and 8.55%, respectively.

The foreign holding in Rupee bonds remained mostly unchanged at Rs. 2.088 billion for the week ending 8 September, while the daily secondary market Treasury bond/bill transacted volumes for the first four trading days of the week averaged Rs. 7.39 billion. 

In money markets, the net liquidity shortfall decreased to Rs. 162.78 billion against its previous week’s Rs. 181.72 billion while CBSL’s holding of Government securities increased to Rs. 1,290.36 billion against its previous weeks of Rs. 1,261.07 billion. The weighted average rates on overnight call money and repo increased marginally to average 5.95% and 5.87%, respectively for the week.

USD/LKR

The forex market continued to remain inactive during the week. The daily USD/LKR average traded volume for the first four trading days of the week stood at $ 30.01 million. 

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