Bond yields decrease further on sovereign dollar bond issue

By Wealth Trust Securities

The launch of a Sri Lankan sovereign dollar bond yesterday led to an active secondary bond market, with yields decreasing further. 

Increased activity was witnessed around the liquid maturities consisting of the of two 2024 maturities and 01.08.26 maturity with their yields dipping to seven-month lows of 11.40%, 11.45% and 11.55% respectively, during the morning hours of trading. 

However, subsequent selling interest on the back of a Treasury bond auction due on 9 May resulted in yields increasing marginally towards the later part of the day to highs of 11.50%, 11.55% and 11.62% respectively prior to closing at levels of 11.42/50, 11.45/55 and 11.50/60.

Furthermore, trades were also witnessed of the three 2019 maturities (i.e. 15.01.19, 01.07.19 and 15.09.19, two 2021 maturities (i.e. 01.03.21 and 15.12.21), 01.09.23 and 01.06.26 within the range of 10.90% to 11.20%, 11.25% to 11.35%, 11.48% to 11.60% and 11.50% to 11.65% respectively.

The total secondary market Treasury bond transacted volume for 3 May 2017 was Rs. 15.5 billion.

In money markets, the Open Market Operations Department of the Central Bank of Sri Lanka was seen injecting an amount of Rs. 13.00 billion on an overnight basis by way of a reverse repo auction at a weighted average of 8.75% as net liquidity shortage stood at Rs. 12.72 billion. The overnight call money and repo rates averaged at 8.75% and 8.79% respectively.

 

Rupee appreciates 

In the Forex market, the USD/LKR rate on spot next contracts appreciated marginally to close the day at Rs. 152.80/85 on the back of expectations of dollar inflows from the sovereign bond issue, in comparison to the previous day’s closing level of Rs. 153.00/10.

The total USD/LKR traded volume for 3 May 2017 was $ 41.47 million.

Some of the forward USD/LKR rates that prevailed in the market were one month - 153.75/85; three months - 155.75/85 and six months - 158.65/75.