Rs. 120 b Treasury bill auction in focus

• Secondary bond market remains active; yields edge up further
• Rupee continues to advance

By Wealth Trust Securities 

This week’s Treasury bill auction due today, will have in total an amount of Rs. 120 billion on offer, which will consist of Rs. 30 billion on the 91-day maturity, Rs. 40 billion on the 182-day maturity and a further Rs. 50 billion on the 364-day maturity. This reflects a decrease of Rs. 15 billion on the offered amount on a week-on-week basis.

For context, at the weekly Treasury bill auction conducted last Wednesday (14 February), the weighted averages yields dropped dramatically across the board for a fifth consecutive week. In particular, the weighted average yields on the 91-day and 182-day maturities declined to 9.79% and 9.86% respectively, reflecting drops of 117 and 121 basis points falling below the Standing Lending Facility Rate (SLFR) of 10.00%. The 364-day maturity too plunged by 71 basis points to 10.02%. The strong demand saw the total offered amount of Rs. 135.00 billion been raised at the 1st phase of the auction, while a further amount of Rs. 33.75 billion was raised at the 2nd phase, being the maximum aggregate amount offered, only on the 182-day and 364-day maturities. The 2nd phase also went heavily oversubscribed with bids exceeding Rs. 75.00 billion.

The secondary bond market yesterday remained active, with yields moving up further, on the back of profit-taking selling pressure. Trading continued to be predominantly on short tenors while buying interest at elevated levels curtailed further upward movement. The 2028 tenors (15.03.28, 01.07.28 and 01.09.28) were seen hitting intraday highs of 12.40% as against intraday lows of 12.23%, while 2026 (01.06.26, 01.08.26) tenors were seen hitting intraday highs of 11.25% as against lows of 11.15%. Additionally, trades were observed on the maturities of 15.01.25, 15.09.27 and 01.07.32 within the ranges of 10.25% to 10.20%, 12.00% and 11.80% and 13.05% respectively.

In secondary market bills, May 2024 maturities (approximately 3 months) were seen changing hands at 9.80% on the back of notably large volumes. Similarly, August 2024 (approximately 6 months) maturities were seen trading at 9.90%. Meanwhile, January/February 2025 maturities (approximately 1 year) were seen trading down from 10.20% to 9.90%.

The total secondary market Treasury bond/bill transacted volume for 19 February was Rs. 16.86 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 9.22% and 9.43% respectively as the DOD (Domestic Operations Department) of Central Bank injected liquidity by way of an overnight and 7-day term reverse repo auction for Rs. 24.56 billion and Rs. 40.00 billion at the weighted average rates of 9.46% and 9.94% respectively.

The net liquidity surplus stood at Rs. 23.26 billion yesterday as an amount of Rs. 19.60 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 10.00% against an amount of Rs. 107.42 billion been deposited at Central Banks SDFR (Standard Deposit Facility Rate) of 9.00%. 

Forex Market 

In the Forex market, the USD/LKR rate on spot contracts closed the day stronger at 

Rs. 311.90/311.95 against its previous day’s closing level of Rs. 312.15/312.25.

The total USD/LKR traded volume for 19 February was 

$ 65.55 million.