Israel-Iran ceasefire sparks relief rally

• Rs. 65 b T-bill auction in focus
• Rs. 295 b mega T-bond auction details announced
• Rupee appreciates

By Wealth Trust Securities

The secondary bond market yesterday saw yields decline as the news that US President 

Donald Trump announced a ceasefire between Israel and Iran sparked a recovery on the back of renewed buying interest. This improvement in sentiment was reflected in both local and foreign stock markets, while global oil prices also declined sharply in response. Initial uncertainty due to conflicting reports gave way as foreign media confirmed that Israel and Iran had indeed agreed to a ceasefire, despite ongoing missile exchanges. Toward the end of the day, yields saw a slight reversal amid profit-taking and reports that Israel alleged Iran had violated the ceasefire—an allegation that was promptly denied by Iranian authorities. However, at the end of the day two-way quotes in the secondary market closed notably lower, supported by robust trading volumes and active market participation despite the rapidly evolving geopolitical backdrop.

The 15.12.26 traded at the rate of 8.15%. The 15.03.28 traded down the range of 8.96%-8.90%. The 01.05.28 and 01.07.28 maturities traded at the rates of 9.00%-8.95% and 9.05%-9.00% respectively. The yield on the popular 15.06.29, 15.09.29 and 15.12.29 maturities declined down the ranges of 9.60%-9.50%, 9.65%-9.55%, 9.70%-9.58% respectively. The 15.05.30 traded at the rates of 10.72%-10.70%. The 15.12.32 maturity traded down the range of 10.47%-10.40%.

This comes ahead of the Treasury bill auction due today. The auction will have on offer a total amount of Rs. 65.00 billion on offer, a decrease of Rs. 67.00 billion over the previous week. This will consist of Rs. 25.00 billion on the 91-day maturity, Rs. 25.00 billion on the 182-day and Rs. 15.00 billion on the 364-day maturity.

For reference the weekly Treasury bill auction conducted last Wednesday (18th June) ended in under-subscription, with only 86.83% of the total Rs. 132 billion offered—amounting to Rs. 114.62 billion—being accepted through successful bids. The weighted average yield on the 182-day tenor edged up by 1 basis point to 7.73%, while yields on the 91-day and 364-day tenors remained unchanged at 7.55% and 7.94%, respectively.

In addition, the details of the upcoming Rs. 295.00 billion Treasury bond auction scheduled to be held on 27 June 2025 were announced. The auction will be comprised of:

• Rs. 120.00 billion from a 15 October 2029 Maturity bearing a coupon rate of 10.35%
• Rs. 40.00 billion from a 15 March 2031 Maturity bearing a coupon rate of 11.25%
• Rs. 115.00 billion from a 01 November 2033 Maturity bearing a coupon rate of 09.00%
• Rs. 20.00 billion from a 01 July 2037 Maturity bearing a coupon rate of 10.75%

The settlement for which will be held on 01 July 2025.

The total secondary market Treasury bond/bill transacted volume for 23 June was Rs. 10.53 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 7.74% and 7.75% respectively.

The net liquidity surplus was recorded to Rs. 110.65 billion yesterday. An amount of Rs. 1.40 billion was withdrawn from the Central Banks SLFR (Standing Lending Facility Rate) of 8.25%, while an amount of Rs. 112.05 billion was deposited at Central Banks SDFR (Standard Deposit Facility Rate) of 7.25%.

Forex Market 

In the Forex market, the USD/LKR rate on spot contracts closed the day appreciating to Rs. 300.50/300.60 as against 301.00/301.30 the previous day.

The total USD/LKR traded volume for 23 June was $ 45.68 million.

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