Bond market at a standstill ahead of bond auctions and monetary policy announcement

By Wealth Trust Securities

Activity in secondary bond markets was at a complete standstill yesterday ahead of four Treasury bond auctions and the Central Bank’s monetary policy announcement for the month of March, all due today. The Central Bank of Sri Lanka increased its Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) by 50 basis points each to 6.50% and 8.00% respectively at its monthly February meeting, the first such move since April 2012.

Today’s Treasury bond auctions will see a total amount of Rs.40 billion on offer, consisting of Rs.10 billion each on a 04.01 year maturity of 1 May 2020, a 8.11 year maturity of 15 March 2025, a 10.02 year  maturity of 1 June 2026 and a 14.01 year maturity of 15 May 2030. All bids received for the previous Treasury bond auctions conducted on 24 March were rejected.

In money markets, Central Banks Standing Lending Facility Rate (SLFR) window was accessed for a staggering volume of Rs.19.12 billion yesterday, its highest since November 2008. A further Rs.17.34 billion was deposited at its Standing Deposit Facility Rate (SDFR), aggregating market liquidity to a net deficit of Rs.1.78 billion. Call money and repo rates remained steady to average 7.98% and 8.01% respectively.

Rupee continues to slide   

The USD/LKR rate on the active one week forward contract was seen depreciating further yesterday to close the day at Rs.148.20/30 against its previous weeks closing of Rs.147.50/80 on the back of importer demand. This reflects a slide of Rs.3.05 over the past two weeks. The total USD/LKR traded volume for 24 March was $ 85.50 million. 

Some of the forward USD/LKR rates that prevailed in the market were one month – 149.00/20; three months – 150.65/00; and six months – 153.15/30.