Sunday May 05, 2024
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Monday, 18 March 2024 00:37 - - {{hitsCtrl.values.hits}}
By Wealth Trust Securities
In the bond market, last Tuesday (12 March) marked the largest Treasury bond auction conducted in Sri Lanka’s history, which saw the entire offered amount of a staggering Rs. 270 billion been fully subscribed at the 1st and 2nd phases of the auction. However, rates recorded mixed results. The weighted average yields were seen increasing as compared to the previous round of bond auctions conducted on 13 February, when the same 2026 and 2028 durations were previously offered. The 15.12.26 maturity recorded a weighted average rate of 11.33% as against pre-auction market rate of 11.00/05% and compared to 10.81% at the previous auction. The 15.12.28 average was recorded at 12.25% as against its pre-auction rate of 12.20/40 and compared to 11.90% at the previous auction. The 15.03.31 was issued at a weighted average of 12.42% as against its pre-auction rate of 12.35/65. Total bids exceeded the offered amount by close to 2 times, a remarkable outcome considering the scale of the auction. An additional amount of Rs. 14.00 billion being the maximum amount offered, was raised out of the total market subscription of Rs. 65,944 million via the Direct Issuance Window from the 2028 and 2031 durations as well.
At the weekly Treasury bill auction last Wednesday (13 March), the weighted average yields were seen increasing across all three maturities, for a third consecutive week. The 91-day maturity increased by 14 basis points to 10.10%, the 182-day maturity increased by 13 basis points to 10.21%, while the 364-day maturity also went up by 10 basis points to stand at 10.24%. This was on the heels of the bond auction conducted the day before, which also saw yields move up considerably on the short tenor 15.12.2026 maturity. Accordingly, rates across all three maturities were seen moving above the Central Bank’s Standing Lending Facility Rate of 10.00%, for the first time in 5 weeks. The auction went undersubscribed with 92.94% or Rs. 167.30 billion out of the Rs. 180.00 billion offered raised at the 1st phase of the auction. An additional amount of Rs. 1.45 billion was raised at the 2nd phase on the 91- and 182-day tenors.
The secondary bond market commenced the trading week ending 15 March on a subdued note, as market participants adopted a wait and see stance in the run up to the Rs. 270 billion Treasury bond auction. Trades were centred on the short end of the yield curve on tenors between 2026 and 2028 with a particular emphasis on auction maturities. Post auction saw mixed results as the yield on the 15.12.26 auction maturity was seen touching an intraweek high of 11.40% However the 15.12.28 was seen trading down from 12.20% to 12.15% immediately after the auction. Subsequently, the market stagnated midweek with yields holding steady, before experiencing a small rally that drove the 15.12.26 down to intraweek lows of 11.32% and the 15.12.28 down to 12.10% on the back of improved activity and healthy transaction volumes, at the close of the week.
Additionally, trades were observed on the following maturities of 01.05.27, 01.07.28 and 15.05.30 at 11.90%, 12.13% to 12.12% and 12.35% to 12.25% respectively post auction, while the 01.08.26 maturity was seen changing hands at 11.06% to 11.03% prior to the bond auction.
The foreign holding in Rupee bonds and bills for the week ending 15 February 2024 recorded a net outflow, amounting to Rs 7.34 billion. As a result, the total holding decreased to Rs. 88.69 billion.
The daily secondary market Treasury bond/bill transacted volumes for the first four days of the week averaged at Rs. 35.41 billion.
In money markets, the total outstanding liquidity deficit increased to Rs. 80.42 billion by the week ending 15 March from its previous week’s deficit of Rs. 49.14 billion. The Domestic Operations Department (DOD) of Central Bank continued to inject liquidity during the week by way of overnight and term reverse repo auctions at weighted average yields ranging from 9.18% to 9.39%.
The Central Bank of Sri Lanka’s (CBSL) holding of Government Securities was registered at Rs. 2,691.27 billion as at 15 March 2024, down from its previous week’s level of Rs. 2,715.62.
In the Forex market, the USD/LKR rate on spot contracts was seen appreciating during the week to close at Rs. 305.20/305.25. This is as against its previous weeks closing level of Rs. 307.30/307.40 and subsequent to trading at a high of Rs. 307.30 and a low of Rs. 305.20.
The daily USD/LKR average traded volume for the first four trading days of the week stood at $ 104.04 million.
(References: Central Bank of Sri Lanka, Bloomberg E-Bond trading platform, Money broking companies)
