Yield curve records historical drop

• Bond yields at pre-April 2022 rate hike levels

By Wealth Trust Securities

The framework and Parliamentary approval of the Domestic Debt Optimisation (DDO) over the 5-day banking holiday led to a significant bullish start in the secondary bond market yesterday, which saw the yield curve record one of its steepest drops historically.  

The increased activity levels were seen on the maturities 01.07.25, 15.05.26, two 2027’s (i.e., 01.05.27 & 15.09.27), 15.01.28 and 01.07.32 as its yields were seen decreasing to intraday lows of 14.75%, 14.00%, 13.75% each, 13.47% and 12.00% respectively against its previous day’s closing level of 28.25/75, 27.00/28.00, 24.50/25.50 each, 22.00/24.00 and 20.25/21.00, leading to a steep parallel shift downwards of the overall yield curve. In addition, maturities of 01.06.25 and 15.07.29 traded at lows of 15.00% and 13.00% respectively as well.

The total secondary market Treasury bond/bill transacted volume for 28 June 2023 was Rs.19.67 billion.

In money markets, the weighted average rates on overnight call money and repo were registered at 13.78% and 13.93% respectively as the DOD (Domestic Operations Department) of the Central Bank injected liquidity by way of an overnight and 7-day reverse repo auctions for a total volume of Rs.112.00 billion at weighted average rates of 13.81% and 14.00% respectively. Further an amount of Rs.104.19 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 14.00%.

Forex Market 

In the Forex market, the USD/LKR rate on spot contracts traded within the range of Rs.305.00 to Rs.307.00 yesterday before closing the day broadly steady at Rs.306.50/307.50.  

The total USD/LKR traded volume for 28 June  was $ 70.52 million. 

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