Yield curve records an upward shift

• Foreign outflow continues   
• Money market liquidity improves 
• Rupee depreciates further

By Wealth Trust Securities

The secondary market bond yield curve recorded an upward shift during the week ending 13 November due to selling interest, which was driven by the primary auction outcomes, where both the weekly Treasury bill auction and the Treasury bond auctions were undersubscribed.

Activity remained moderate throughout the week and centered on the liquid maturities of 2022s (15.11.22 and 15.12.22), 2023s (i.e. (01.09.23 and 15.12.23), 15.09.24, 01.05.25, 01.02.26, 15.10.27 and 15.05.30 with its yields increasing to intra week highs of 5.60%, 5.75%, 6.02%, 6.05%, 6.30%, 6.50%, 6.65%, 7.04% and 7.66% respectively against its previous week’s closing levels of 5.55/65, 5.62/68, 5.90/00, 5.95/05, 6.20/25, 6.40/50, 6.60/65, 6.95/02 and 7.35/65. 

In addition, short dated bond maturities of 2021s (i.e. 01.03.21, 01.05.21, 01.08.21 and 15.12.21) and additional 2022s (i.e. 15.03.22, 01.07.22 and 01.10.22) traded at levels of 4.58% to 5.10% and 5.45% to 5.65% as well. Activity in the secondary bill market remained high during the week as January, February, March, June and September 2021 bills changed hands at levels of 4.60% to 4.64%, 4.64%, 4.63%, 4.78% to 4.80% and 4.82% respectively.  

The foreign holding in Sri Lankan Rupee bonds recorded an outflow for a second consecutive week to the tune of Rs. 1.43 billion for the week ending 11 November 2020.

The daily secondary market Treasury bond/bill transacted volumes for the first four trading days of the week averaged Rs. 10.79 billion.  

In money markets, the total outstanding market liquidity in the system was seen increasing for the first time in three weeks to record a surplus of Rs. 140.06 billion against its previous week of Rs. 123.80 billion. The weighted average rates on overnight call money and repo remained mostly unchanged at 4.54% and 4.59% respectively for the week while the CBSL’s holding of Government Securities increased further to 515.97 billion.

Rupee depreciates

In the Forex market, The USD/LKR rate on spot contracts was seen depreciating further during the week to close the week at a level of Rs. 184.70/80 against its previous week’s closing level of Rs. 184.45/50 on the back of continued buying interest by banks.

The daily USD/LKR average traded volume for the first four days of the week stood at $ 47.40 million.  

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