Mixed outcome at primary bond auctions

Thursday, 4 June 2020 00:00 - - {{hitsCtrl.values.hits}}

Bond yields decrease
Rupee continues to appreciate

By Wealth Trust Securities

The Treasury bond auctions conducted yesterday reflected mixed outcomes as the 2 year and 06 months maturity of 15 December 2022 recorded a weighted average of 7.90%, above its pre-auction rate of 7.70/75 for a similar maturity, but below its stipulated cut off rate of 7.95%. However, the 4 year and 11 months maturity of 1 May 2025 recorded an impressive weighted average of 8.59%, equal to its pre-auction rate of 8.58/65, but below its stipulated cut off rate of 8.65%. The total Rs. 65 billion that was on offer on the two Treasury bond maturities was successfully taken up at its phase 1 stage as the bids to offer ratio stood at 2.08:1.

In the secondary bond market, activity increased subsequent to the auction outcomes as yields decreased across the yield curve. Renewed buying interest on the maturities of 15.12.22, 15.01.23, 2024s (i.e. 15.06.24 & 15.09.24) and 2025s (i.e. 15.03.25 & 01.05.25) saw its yields decrease to lows of 7.77%, 7.82%, 8.39%, 8.41%, 8.60% and 8.55% respectively. In the secondary bill market, August 2020 to December 2020 maturities changed hands within the range of 6.65% to 6.80%.

The total secondary market Treasury bond/bill transacted volume for 2 June was Rs. 17.27 billion.

In money markets, the weighted average rates on overnight call money and repo was recorded at 5.84% and 6.04% respectively as the overnight net liquidity surplus in the system increased further to Rs. 77.81 billion yesterday.

The DOD (Domestic Operations Department) of Central Bank injected an amount of Rs. 16.3 billion by way of an 8-day reverse repo auction at a weighted average rate of 5.95%, subsequent to offering Rs. 25 billion. It further injected an amount of Rs. 10.00 billion for Standalone Primary Dealers by way of an 8-day reverse repo auction at a weighted average rate of 6.48%.

Rupee continues to strengthen

In the Forex market, the USD/LKR rate on spot contracts strengthen further yesterday to close the day at Rs. 185.75/85 against its previous day’s closing levels of Rs. 185.80/00 on the back of continued selling interest from banks.

The total USD/LKR traded volume for 2 June was $ 98.20 million.

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