Treasury bill rates tumble over 40 basis points on shorter tenors

• Monetary policy rates slashed by 25 bps

By Wealth Trust Securities

The Central Bank of Sri Lanka resumed monetary easing by reducing the monetary policy rates for the sixth time since June 2023 at its fourth review meeting for the year 2024 which was announced yesterday. A decrease of 25 basis points saw the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) reduced to 8.25% and 9.25% respectively. The Statutory Reserve Ratio (SRR) was kept unchanged at 2.00%.

Meanwhile, the declining trend in the weekly Treasury bill weighted average yields continued for a third consecutive week with the 182-day bill recording the steepest drop of 44 basis points to 9.34% followed by the 91-day bill recording a decline of 41 basis points to 9.14%. The 364-day bill dipped by a 12 basis points to 9.95%. The total offered volume of Rs. 160.00 billion was successfully taken up at the auction while the bid to offer ratio stood at 2.01:1.

The 2nd phase of the auction will be opened on 182-day and 364-day maturities at its weighted average rates until close of business of the day prior to settlement (i.e., 4.00 p.m. on 25.07.2024).

Given below are the details of the auction;

Nevertheless, overall activity in the secondary bond market remained rather low yesterday as a majority of market participants were seen on the side-lines ahead of Treasury bond auctions due 30 July 2024. Limited trades were seen on the liquid 15.12.27 maturity, 2028 maturities (i.e. 15.02.28, 15.03.28 & 01.05.28) and 15.09.29 maturity at levels of 11.60% to 11.65%, 11.70% to 11.75% and 12.00% respectively while 2026 maturities (i.e. 15.05.26, 01.06.26 and 15.12.26) was traded at levels of 10.20% each and 10.40% respectively.

However, secondary market bills continued to see strong demand with September 2024 (close to 1 months), November 2024 (close to 3 months) and February 2025 (close to six months) maturities trading at the rates of 8.95%, 9.15% and 9.35% respectively.

The total secondary market Treasury bond/bill transacted volume for 23rd July was Rs. 8.73 billion.

In money markets, the weighted average rates on overnight call money and were 8.54% and 8.62%, respectively.

The net liquidity surplus stood at Rs. 87.92 billion yesterday as an amount of Rs. 2.12 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 9.25% against an amount of Rs. 115.04 billion deposited at Central Banks SDFR (Standard Deposit Facility Rate) of 8.25%. 

The DOD (Domestic Operations Department) of Central Bank injected liquidity by way of an overnight reverse repo auction for Rs. 25.00 billion and Rs. 50.00 billion at the weighted average rates of 8.51%.

Forex market 

In the Forex market, the USD/LKR on spot contracts appreciated further to close the day at Rs. 303.55/65 against its previous day’s closing level of Rs. 303.70/80.

The total USD/LKR traded volume for 23 July was $ 20.10 million. 

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