T-bill yields fall for 8th consecutive week at auction; fresh lows in over two years

• Rupee holds steady

By Wealth Trust Securities

At the weekly Treasury bill auction conducted yesterday, the weighted average yields declined across all three maturities for an eighth consecutive week, reaching the lowest levels since 2 March 2022. This week’s decline was also considerably steep, with the 91-day maturity falling by 14 basis points to 8.62%, the 182-day maturity by 13 basis points to 9.04% and the 364-day maturity by 11 basis points to 9.18%. The auction went fully subscribed with the entire offered amount of Rs. 160.00 billion accepted at the 1st phase. The total bids received exceeded the offered amount by 2.20 times.

The 2nd phase of subscription, across all three maturities will be opened until 4:00 p.m. on the day before the settlement date (i.e., 30.05.2024) at the respective weighted averages determined at the 1st phase of the auction. Given below are the details of the auction;

Meanwhile the secondary bond market started off slow with some sparse trades, but saw an increase in activity after the release of the auction results. The bullish outcome at the auction resulted in renewed buying interest that pushed yields down to recover lost gains from the previous day’s sell-off. However, the 2026 tenors in particular continued to buck the trend and saw strong demand that pushed yields to fresh lows. Trading as usual continued to be centred on the short to medium end of the yield curve with a specific emphasis on 2025-2032 tenors. 

Accordingly, the 2025 tenors of 01.06.25 and 01.07.25 saw yields drop from 9.40% to 9.35%. The yield on the liquid 15.12.26 maturity declined to an intraday low of 9.75% from an intraday high of 9.93%, on the back of aggressive buying. While the 15.05.26, 01.06.26 and 01.08.26 also saw significant demand, trading down from intraday highs of 9.85% down to 9.70%. Similarly, the popular 2028 durations, such as the 15.03.28 and 01.07.28 hit intraday lows of 10.70% and 10.75% as against opening highs of 10.85% and 10.90% respectively. Whereas the medium tenor 01.10.32 maturity was seen trading at 10.85%.

The total secondary market Treasury bond/bill transacted volume for 28 May was Rs. 17.27 billion. In money markets, the weighted average rates on overnight call money and Repo stood at 8.66% and 8.77% respectively while the net liquidity was a surplus Rs. 189.74 billion yesterday. An amount of Rs. 3.78 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 9.50% against an amount of Rs. 193.53 billion deposited at Central Banks SDFR (Standard Deposit Facility Rate) of 8.50%.

Forex Market

In the Forex market, the USD/LKR rate on spot contracts closed the day, broadly steady, at Rs. 301.60/302.00, against its previous day’s closing level of Rs. 301.70/302.30.

The total USD/LKR traded volume for 28 May was $ 32.90 million.