Bonds yields nosedive ahead of monetary policy announcement

By Wealth Trust Securities

The downward movement in secondary market bond yields intensified yesterday on the back of aggressive local buying interest. The yields on the liquid 2024’s (i.e. 15.03.24, 15.06.24 & 15.09.24) and 2026’s (i.e. 01.06.26 & 01.08.26) were seen decreasing considerably to intraday lows of 9.57% 9.53% 9.55%, 9.72% and 9.70% respectively against its previous day’s closing levels of 9.72/80, 9.77/80, 9.78/80, 9.90/05 and 9.90/98. In addition, 2023’s (i.e. 15.05.23, 15.07.23 & 15.12.23) and 2027’s (i.e. 15.01.27 & 15.10.27) changed hands at levels of 9.35%, 9.38% to 9.40%, and 9.45% to 9.50%, 9.80% to 9.83% and 9.88% to 9.95% respectively as well.

In secondary bills, May and December 2020 maturities changed hands within the range of 7.81% to 7.88% and 8.40% to 8.45% respectively.

This was ahead of today’s monetary policy announcement, the last for the year 2019, due at 7.30 am. The Central Bank of Sri Lanka kept policy rates unchanged at its announcement on 29 November.

The total secondary market Treasury bond/Bill transacted volume for 24 December was Rs. 4.73 billion.

In money markets, the overnight call money and repo rates averaged at 7.50% and 7.56% respectively as the Open Market Operations (OMO) Department of the Central Bank of Sri Lanka injected amounts of Rs. 15.8 billion and 5.00 billion respectively on an overnight and five day basis by way of Reverse Repo auctions at weighted average rates of 7.50% and 7.52%. It further injected an amount of Rs. 1.095 billion for Standalone Primary Dealers by way of an overnight reverse repo auction at a weighted average rate of 7.60% while an amount of Rs. 20.00 billion was also injected for 13 days at a weighted average rate of 7.50%, value today.

The overnight net liquidity surplus in the system stood at Rs. 31.45 billion yesterday.

Rupee mostly unchanged 

In the Forex market, the USD/LKR rate on spot contracts were seen fluctuating within a tight range of Rs. 181.35 to Rs. 181.49, closing the day mostly unchanged at Rs. 181.35/45 against its previous day’s closing levels.

The total USD/LKR traded volume for 24 December was $ 114.09 million.

Some of the forward USD/LKR rates that prevailed in the market were 1 month - 181.80/00; 3 months - 182.70/90 and 6 months - 184.35/65.