Secondary bond market remains active as yields fluctuate

• Foreign buying continues for sixth consecutive week   

By Wealth Trust Securities

The secondary bond market remained active during the week ending 16th June, with yields initially decreasing towards the early part of the week prior to bouncing back up towards the later part.

The yields of the liquid 2021 maturities (i.e. 01.08.21 and 15.12.21), 2023’s (i.e. 15.05.23 and 01.09.23), 01.08.24 and 01.08.26 were seen decreasing to weekly lows of 11.23%, 11.24%, 11.36%, 11.35%, 11.40% and 11.48% respectively against its previous weeks closing levels of  11.30/40, 11.34/37, 11.52/57, 11.50/55 each, and 11.58/65. 

This downward trend was well supported by the considerable decrease in the weighted average yields of the 15.05.23 maturity by 11 basis points, 15.03.25 maturity by 09 basis points and the 01.08.21 maturity by 05 basis points at the bond auction held on the 13th, as well as the decrease in yields at the weekly Treasury bill auction.

However, the US FED rate decision coupled with profit taking resulted in yields increasing once again towards the latter part of the week to hit highs of 11.35%, 11.40%, 11.43%, 11.49%, 11.55% and 11.60%, to close mostly in par with the previous week. Activity was also witnessed of the 2019 maturities within the range of 10.75% to 10.95%.

In the meantime, buying interest in the secondary bill market, resulted in durations centering on the 182 day and the 364 day maturities, changing hands within the range of 10.20% to 10.25% and 10.30% to 10.40% respectively.

Meanwhile, the foreign holding in Sri Lankan Rupee bonds continued to increase for a sixth consecutive week with an inflow of Rs.7.9 billion for the week ending 14 June.

Meanwhile in money markets, the OMO Department of the Central Bank of Sri Lanka was seen conducting overnight Reverse Repo auctions throughout the week in order to infuse liquidity at a weighted average of 8.75% as the net liquidity shortfall in the system increased to average Rs.14.36 billion against the previous week’s level of Rs.1.82 billion.  The overnight call money and repo rates remained most unchanged to average 8.75% and 8.81% respectively.  

Rupee dips during the week

The rupee on active spot next contracts lost ground during the week on the back of importer demand to close the week at Rs.153.15/20 in comparison to its previous week’s closing level of Rs.152.83/88.

The daily USD/LKR average traded volume for the four days of the week stood at US $ 71.88 million.

Some of the forward dollar rates that prevailed in the market were one month – 154.20/30; three months – 156.25/35; and six months – 159.15/25.