Treasury bond auction worth Rs. 85 b fully subscribed; yields record mixed results

• Rs. 65 b Treasury bill auction in focus; rupee appreciates marginally

 

By Wealth Trust Securities

Yesterday’s round of Treasury bond auctions produced mixed results. Initially, the auction was undersubscribed, with only Rs. 38.43 billion raised at the 1st phase in competitive bidding. However, by the conclusion of the second phase, the entire amount of Rs. 85.00 billion was successfully raised, issued at the weighted averages determined at the 1st phase across all three maturities. As a result, the total bids received exceeded the offered amount by 3.53 times. In terms of yields, the 15.12.26 maturity was issued at the weighted average rate of 11.44%, up from the previously at 15 March 2024 auction where the same maturity was issued at 11.33%. However, this was in line with the market two-way prior to the auction as yields had edged up since the previous auction. Meanwhile the 15.09.29 maturity, a new issuance, was issued at the rate of 12.37% which was also in line with the market two way for 2029 durations of 12.30%/12.50% prior to the auction. Similarly, the 01.10.32 was issued at the weighted average of 12.51%, which was slightly below the market two-way for 2032 tenors of 12.60%/12.70% prior to the auction.

The secondary bond market was quiet at the start of the day as it had been in the days running up to the auction. However, after the release of the Treasury bond auction results activity was seen increasing. Accordingly, limited trades were observed on maturities of 01.07.32 prior to the auction at 12.63% and post-auction on the 15.12.26 auction maturity at the rate of 11.40%. Overall volumes remained relatively low.

This week’s Treasury bill auction due today, will have in total an amount of Rs. 65.00 billion on offer, which will consist of Rs. 25.00 billion on the 91-day maturity, Rs. 20.00 billion on the 182-day maturity and a further Rs. 20.00 billion on the 364-day maturity. This reflects a decrease of Rs. 70.00 billion on the offered amount on a week-on-week basis.

For context, at the weekly Treasury bill auction conducted last Wednesday (3 April 2024), the weighted average yields were seen increasing marginally on the shorter tenors. The 91-day maturity increased by 04 basis points to 10.11%, while the 182-day maturity increased by 07 basis points to 10.30%. However, the 364-day maturity remained unchanged at 10.28%. Yields were seen resuming an upward trajectory after rates dropped the previous week, following a knee-jerk reaction to a monetary policy rate cut of 50 basis points. Prior to the previous week’s dip, yields had been on an increasing trend for 4 consecutive weeks. The auction went undersubscribed, with only 98.02% or Rs. 132.33 billion out of the Rs. 135.00 billion offered raised at the 1st phase of the auction. An additional amount of Rs. 6.48 billion was raised at the 2nd phase of the auction.

The total secondary market Treasury bond/bill transacted volume for 5 April was Rs. 19.34 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 8.62% and 9.19% respectively as the DOD (Domestic Operations Department) of Central Bank injected liquidity by way of an overnight reverse repo auction for Rs. 19.98 billion respectively at weighted average rates of 8.64%.

The net liquidity surplus stood at Rs. 158.60 billion yesterday as an amount of Rs. 4.34 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 9.50% against an amount of Rs. 182.91 billion being 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 at Rs. 298.90/299.00 as against its previous day’s closing level of Rs. 299.20/299.30.

The total USD/LKR traded volume for 5 April was  $ 115.05 million. 

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