Bond yields increase for third consecutive week

• Foreign holding in LKR bonds reduces for a fourth consecutive week 

By Wealth Trust Securities

The secondary bond market witnessed continued selling interest during the shortened trading week ending 20 February by both local and foreign investors, which led to yields increasing for a third consecutive week. Yields seesawed during the week before closing higher, mainly on the 2023 and 2024 maturities. 

The liquid maturities of 2023s (i.e. 15.03.23 and 01.09.23) and 2024s (i.e. 15.06.24 and 15.09.24) saw its yields hit year to date (2020) highs of  9.55%, 9.50% and 9.80% each respectively against its previous weeks closing levels of 9.20/30, 9.25/40 and 9.58/62 each.  

In addition, the maturities of 2021s (i.e. 01.08.21 and 15.12.21), 2022’s (i.e.15.03.22 and 01.10.22), 2023s (i.e.15.05.23 and 15.07.23), 2024s (i.e.15.03.24 and 01.08.24), 2027s (i.e. 15.06.27 and 15.10.27), 01.09.28 and 15.01.33 were seen changing hands at levels of 8.90% to 9.10%, 9.15% to 9.35%, 9.30% to 9.48%, 9.60% to 9.85%, 9.85% to 10.10%, 9.97% to 10.11% and 10.02%  respectively as well. 

The weighted averages of the weekly Treasury bill auction increased across the board by eight, two and five basis points on the 91 day, 182 day and 364 day maturities respectively to 7.44%, 8.06% and 8.60%.    

The market also witnessed continued foreign selling interest of rupee bonds with an outflow of Rs. 1.2 billion for the week ending 19 February, recording a total outflow of Rs. 11.79 billion over the past four weeks. 

The daily secondary market Treasury bond/bill transacted volumes for the first three days of the week averaged at Rs. 15.78 billion.  

In money markets, the net overnight liquidity surplus in the system was seen fluctuating within the range of a low of Rs. 0.52 billion to a high of Rs. 23.70 billion during the week while the total liquidity in the system remained at a deficit Rs. 0.02 billion. The overnight call money and repo rates averaged 6.99% and 7.04% respectively for the week. 

The Domestic Operations Department (DOD) of Central Bank injected a total amount of Rs. 8.95 billion by way of outright purchases of Treasury Bonds on the maturities of 15.06.2024 and 15.09.2024 at weighted averages of 9.63% to 9.68% respectively.   

Rupee closes stronger 

In the Forex market, the rupee on its spot contracts was seen closing the week stronger at Rs. 181.55/60, subsequent to trading at a low of Rs. 182.00. It closed at Rs. 181.45/52 the previous week. 

The daily USD/LKR average traded volume during the first three days of the week stood at $89.54 million. 

Some of the forward dollar rates that prevailed in the market were one month – 182.00/20; three months – 183.15/45 and six months – 184.70/00.

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