Bullish outcome at Bond auctions; Market rally continues

• Rs. 135 b Treasury Bill Auction in focus
• Rupee holds broadly steady

By Wealth Trust Securities

The Treasury bond auctions conducted yesterday recorded a bullish outcome, with the entire offered amount of Rs. 55 billion on the 2026 and 2028 durations being fully taken up, reflecting the declining trend in market interest rates. The total bids received exceeded the total offered amount by an impressive 2.74 times. The 15.12.2026 maturity recorded a weighted average rate of 10.81%, while the 15.12.2028 recorded a weighted average rate of 11.90%. For reference, during the last Treasury bond auctions held on 30 January, the same two maturities were issued at a weighted average of 13.08% and 13.65% respectively.

An issuance window of 20% each, of its offered amount for both maturities is open until close of business of the day prior to settlement date (i.e., 4 p.m. on 31.01.2024) at its respective weighted Average Yield Rates (WAYRs).

Meanwhile, the secondary bond market witnessed two-way quotes edging down with sustained activity and aggressive buying interest seen throughout the day. Trading continued to be predominantly on the 2026 and 2028 durations, with considerable volumes transacted. The 2026 durations (01.02.26, 01.08.26 and 15.12.26) traded down from intraday highs of 10.90% down to 10.57%. Similarly, the 2028 durations (15.03.28, 01.07.28 and 15.12.28) were seen trading within the ranges of 12% to 11.75%. Additionally, trades were observed on the maturities of the two 27’s (01.05.27 and 15.09.27), 15.05.30 and 01.07.32 within the ranges of 11.70% to 11.45%, 12.30% to 12.25%, 12.73% to 12.50% respectively.

In secondary market bills, March/July 2024 and January 2025 maturities were seen changing hands within the ranges of 9.90% to 9.50% and 10.10% to 10% respectively.

The weekly Treasury bill auction due today, will have in total an amount of Rs. 135 billion on offer, which will consist of Rs. 30 billion on the 91-day maturity, Rs. 45 billion on the 182-day maturity and a further Rs. 60 billion on the 364-day maturity. This reflects a decrease of Rs. 10 billion on the offered amount on a week-on-week basis.

For context, at last week’s Treasury bill auction, the weighted averages yields dropped dramatically across the board, for a third consecutive week. The total offered amount of Rs. 145 billion was raised at the first phase of the auction. The 91-day maturity plunged by 101 basis points to 10.96%, the 182-day maturity by 113 basis points to 11.07% and the 364-day maturity by 127 basis points to 10.73%.

The total secondary market Treasury bond/bill transacted volume for 12 February was Rs. 13.67 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 9.15% and 9.83% respectively as the DOD (Domestic Operations Department) of Central Bank injected liquidity by way of an overnight and seven day term reverse repo auctions for Rs. 22.90 billion and Rs. 10 billion respectively at weighted average rates of 9.32% and 9.68% respectively.The net liquidity surplus stood at Rs. 128.03 billion yesterday as an amount of Rs. 4.50 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 10% against an amount of Rs. 165.43 billion being deposited at Central Banks SDFR (Standard Deposit Facility Rate) of 9%. 

Forex Market 

In the Forex market, the USD/LKR rate on spot contracts closed the day at Rs. 313.10/313.30 against its previous day’s closing level of Rs. 313.45/313.75.

The total USD/LKR traded volume for 12 February was $ 100.68 million. 

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