Bond market sentiment remains sluggish

• Weekly T-Bills auction remains undersubscribed
• Money market liquidity decreases

 By Wealth Trust Securities

Activity in the secondary bond market remained rather moderate during the week ending 19 March with no significant momentum generated. The yields on the maturities of 15.12.22, 15.12.23 and 2027’s (i.e. 15.08.27 and 15.10.27) were seen increasing to weekly highs of 5.85%, 6.30% and 7.50% each respectively against its previous weeks closing levels of 5.75/80, 6.23/33, 7.35/45 and 7.45/55 on limited activity while yields were seen fluctuating within the range of 6.14% to 6.20%, 6.18% to 6.28%, 6.45% to 6.50%, 6.55% to 6.64%, 6.66% to 6.70% on the maturities of 15.07.23, 01.09.23, 15.03.24, 15.09.24 and 01.12.24 respectively.

In addition, maturities of 15.03.23, 15.11.23, 01.01.24, other 2024’s (i.e. 15.06.24 and 01.08.24), 15.01.26 and 01.05.29 were seen changing hands within a tight range of 6.05% to 6.07%, 6.22% to 6.25%, 6.35% to 6.40%, 6.50% to 6.56%, 7.05% and 8.20% to 8.25% respectively as well.

The sluggish sentiment was due to the outcome of the weekly Treasury bill auction where the weighted average rates were seen edging up for a seventh consecutive week with only an amount of Rs. 25.82 billion been accepted in total against its total offered amount of Rs. 45 billion. In addition, the drop in money market liquidity, where the total outstanding market liquidity was recorded at Rs. 119.17 billion in comparison to its previous week of Rs. 181.37 billion contributed to the sentiment.

The foreign holding in rupee bonds decreased marginally to Rs. 6.43 billion for the week ending 17 March while the daily secondary market Treasury bond/bill transacted volumes for the first four trading days of the week averaged Rs. 10.00 billion. 

The weighted average rates on overnight call money and repo remained mostly unchanged to average 4.55% and 4.57% respectively for the week while the CBSL’s holding of Gov. Security’s increased to Rs. 824.36 billion.

USD/LKR

In Forex markets, the daily USD/LKR closing rate on the more active one-week forward contracts depreciated to a low of Rs. 201.50/203.00 during the week against its previous weeks closing level of Rs. 197.25/197.75, before bouncing back to close the week at Rs. 198.00/199.00.

The daily USD/LKR average traded volume for the first four days of the week stood at $ 89.97 million. 

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