Bond market yields continue to decrease on key tenors; activity robust 

• Rs. 80 b T-Bill auction in focus

By Wealth Trust Securities 

The secondary Bond market extended its positive momentum for a second consecutive session yesterday, with buying interest continuing to drive yields lower across selected tenors, whilst the remainder of the curve largely consolidated. 

Yesterday, the belly end of the curve remained the focal point of demand, while the short end to the longer end held broadly steady.

Activity and transaction volumes remained robust, supported by several sizeable block transactions.

The 15.02.28, 01.05.28 and 15.12.28 traded at the rates of 10%, 10.05% and 10.10% respectively. The 01.07.30, 01.08.30 and 15.10.30 traded at the rates of 10.35%, 10.45% to 10.40% and 10.48% to10.45% respectively. 

The 2032 tenors saw concentrated buying interest, pushing rates down on the 01.10.32 and 15.12.32 to intraday lows of 10.90% and 10.95% respectively from opening highs of 11.00% each.

The 15.01.33 and 01.11.33 traded at the rates of 11.15% to 11.10% and 11.30% respectively. The 15.10.34 traded within the range of 11.48% to 11.45% and the 15.08.36 traded at the rate of 11.75%. 

The Treasury Billill auction scheduled for today (2), will have a total of Rs. 80 billion on offer, which is slightly below the estimated maturing amount of Rs. 85.97 billion. This will comprise of Rs. 35 billion on the 91-day maturity, Rs. 25 billion on the 182-day maturity and Rs. 20 billion on the 364-day maturity. 

To recap: At last week’s Treasury Bill auction conducted on Monday, weighted average yields extended their downward trajectory, marking a seventh consecutive week of declines as aggressive demand continued to drive yields lower across all three tenors.

The sharpest moves were seen at the short end, with the 91-day yield falling 16 basis points to 9.06%, while the 182-day bill also declined by 16 basis points to 9.44%. The 364-day bill eased by a further 2 basis points to 9.89%.

Demand remained firmly in the driver’s seat, with the Public Debt Management Office (PDMO) raising the full Rs. 120 billion offered and each tenor meeting its targeted allocation. Total bids amounted to 2.86 times the offer, highlighting the strength of investor appetite.  

Demand extended into the second phase with the full Rs. 12 billion offered being taken up against a total market subscription of Rs. 91.03 billion. Accordingly, the aggregate accepted amount stood at Rs. 132 billion. 

In the money market, the net liquidity surplus stood at Rs. 138.76 billion yesterday. Of this, Rs. 101.83 billion was deposited with the Central Bank through the Standing Deposit Facility (SDF) at 8.25%, while Rs. 4.07 billion was withdrawn through the Standing Lending Facility (SLF) at 9.25%.

Meanwhile, the Domestic Operations Department (DOD) of the Central Bank absorbed further liquidity through a series of repo auctions, mopping up Rs. 6.00 billion overnight at a weighted average rate of 8.75%, Rs. 35 billion through a 7-day term repo at 8.75%, and Rs. 10 billion through a 30-day term repo at 9.15%.

The weighted average rates on overnight call money and repos were 8.85% and 8.91% respectively.

Forex market

The USD/LKR rate on spot contracts was seen closing the day at Rs. 328/328.10, as against its previous day’s close of Rs. 328.10/328.30. 

The total USD/LKR traded volume on 31 August was $ 52 million. 

(References: Public Debt Management Office - Ministry of Finance, Central Bank of Sri Lanka, Bloomberg E-Bond Trading Platform, Money Broking Companies)