Bond yields steady; activity remains muted

• Rs. 92.50 b T-bill auction in focus

By Wealth Trust Securities

The secondary bond market yesterday saw yields remaining anchored broadly around prevailing levels. Activity and transaction volumes were subdued as market participants stuck to the sidelines against the backdrop of the Treasury Bond Auction conducted yesterday. The auction outcome, left overall market dynamics largely unchanged, with trading confined to a few selected maturities.

The Treasury bond auction held yesterday with a total offered amount of Rs. 122.00 billion across two available maturities, went undersubscribed. The auctions raised only Rs. 71.06 billion or 58.24% in successful bids across both phases, despite total bids received exceeding the offered amount by 1.70 times. This marked the third consecutive bond auction to raise less than the offered amount. Maturity-wise the results were as follows:

The 01.07.2030 maturity (9.75% coupon) was issued at a weighted average yield of 9.77%, coming in line with market expectations. For comparison, this was in between the secondary market two-way quote of 9.70% / 9.80% on the comparable 15.05.30 maturity just prior to the auction. However, the maturity went undersubscribed at the first phase in competitive bidding. This prompted the opening of the second phase which resulted in Rs. 50.21 billion or 55.78% out of the Rs. 90.00 billion being raised in successful bids across both phases. 

The 01.07.37 maturity (10.75% coupon) also failed to raise the entire maturity-wise offered amount of Rs. 32.00 billion at the 1st phase, which prompted the opening of the 2nd phase. Only 65.16% or Rs. 20.85 billion was raised in successful bids at a weighted average rate of 11.08%. The weighted average came in at a narrow term premium over the nearest actively quoted 15.09.34 maturity 10.90%/11.00%, just prior to the auction.

Given below are the details of the auction:

In the secondary bond market limited trades were observed on the 01.05.28 and 15.10.28 maturities at the rates of 8.90%-8.93% and 9.04%-9.00% respectively. The 15.03.31 maturity also traded at the rate of 10.15%.

In secondary market bills a February 2026 maturity was seen trading at the rate of 7.97%.

This comes ahead of the Treasury bill auction due today. The auction will have on offer a total amount of Rs. 92.50 billion on offer, a decrease of Rs. 18.50 billion over the previous week. This will consist of Rs. 22.50 billion on the 91-day maturity, Rs. 50.00 billion on the 182-day and Rs. 20.00 billion on the 364-day maturity.

For reference, at the weekly Treasury bill auction conducted last Wednesday (23/07/25) the weighted average yield rates remained broadly stable, following two consecutive weeks of across-the-board increases. Accordingly, the weighted average rate on the 91-day tenor stayed flat at 7.62% and the 182-day tenor also remained unchanged at 7.91%. However, the weighted on 364-day tenor recorded a marginal decline of 01 basis point to 8.03%. The auction raised Rs. 76.81 billion out of the total offered amount of Rs. 111.00 billion in successful bids.

The total secondary market Treasury bond/bill transacted volume for 28 July was Rs. 2.85 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 7.83% and 7.86% respectively.

The net liquidity surplus was recorded at Rs. 90.21 billion yesterday.

Forex market 

In the Forex market, the USD/LKR rate on spot contracts closed the day depreciating to Rs. 302.10/302.25 as against Rs. 301.95/302.03 the previous day.

The total USD/LKR traded volume for 28 July was $ 74.10 million.

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