Bond yields edge up further ahead of weekly bill auction

• Policy rates unchanged; rupee continues to dip

By Wealth Trust Securities

The Central Bank of Sri Lanka was seen continuing its accommodative monitory policy stance by holding steady its policy rates at 4.50% and 5.50% at its monetary policy announcement yesterday. The secondary market bond yields were seen increasing further yesterday following the monetary policy announcement on the back of moderate trading.

The liquid maturities of 2022s (15.11.22 and 15.12.22), 01.10.23 and 01.12.24 were seen hitting intraday highs of 5.42%, 5.44%, 5.73% and 6.35% respectively against its previous day’s closing levels of 5.40/44, 5.68/72 and 6.28/30. Nevertheless, renewed buying interest at these levels curtailed any further upward movement in yields as it closed the day marginally lower than its peaks. In secondary bills, 6 August maturity changed hands at 4.75%.

Today’s bill auction will see Rs. 40 billion on offer, consisting of Rs. 12 billion on the 91 day, Rs. 5 billion on the 182 day and a further Rs. 23 billion on the 364 day maturities. At last week’s auction, weighted average yields decreased across the board by 01, 02 and 03 basis points respectively to 4.70%, 4.78% and 5.02% while the stipulated cut off rates for this week was published at 4.71%, 4.80% and 5.02% respectively.

The total secondary market Treasury bond/bill transacted volumes for 18 January was Rs. 5.3 billion.

In the money market, overnight surplus liquidity continued to remain high at Rs. 208.85 billion yesterday while weighted average rates on overnight call money and repo remained mostly unchanged at 4.54% and 4.56% respectively.

Rupee loses further  

In the Forex market, the USD/LKR rate on the more active spot next contracts was seen depreciating further yesterday to close the day at Rs. 196.50/198.00 against its previous day’s closing level of Rs. 194.50/195.50 on the back of continued buying interest by banks.

The total USD/LKR traded volume for 18 January was $ 56.25 million.   

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