Rs. 160 b Treasury bill auction in focus

• Secondary bond market sees yields decline; activity remains moderate
• Rupee sees further incremental gains

By Wealth Trust Securities

This week’s Treasury bill auction due today, will have in total an amount of Rs. 160 billion on offer, which will consist of Rs. 40 billion on the 91-day maturity, Rs. 60 billion on the 182-day maturity and a further Rs. 60 billion on the 364-day maturity. This reflects an increase of Rs. 37.50 billion on the offered amount on a week-on-week basis.

For context, at the Treasury bill auction conducted last Wednesday the weighted average yields were seen increasing across all three maturities marginally, for the first time since end August 2023. This follows a prolonged period where rates had been on a steady decline, with decreases observed in at least one tenor over the last 25 weeks. The 91-day and 182-day maturities increased by 9 basis points each to 9.87% and 9.95% respectively, while the 364-day maturity also went up by 3 basis points to stand at 10.05%. The auction went undersubscribed for a second consecutive week with only 85.15% or Rs. 104.31 billion of the total offered amount of Rs. 122.50 billion raised at the 1st phase of the auction. An additional Rs. 2.02 billion was raised at the 2nd phase which was opened, across all three tenors.

The secondary bond market yesterday saw yields decline on reinvigorated buying interest, albeit on the continuation of moderate activity. Trading was centred on the short end of the yield curve. Accordingly, the 2026 tenor of 01.06.26 was seen changing hands within the range of 10.95% to 10.85%, while 2027 tenors (01.05.27 and 15.09.27) saw yields decline from intraday highs of 11.90% down to 11.75%. Additionally, 2028 tenors (15.01.28, 15.03.28, 01.05.28, 01.07.28 and 15.12.28) were seen changing hands within the range of 12.25% to 12.15%. On medium tenor bonds 15.07.29 and 15.05.30 maturities were seen changing hands at the levels of 12.40% and 12.55% to 12.30%.

In secondary market bills, May/June 2024 maturities (approximately three months) were seen changing hands at 9.95% to 9.82% levels.

The total secondary market Treasury bond/bill transacted volume for 4 March was Rs. 12.48 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 9.18% and 9.26% 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. 38.68 billion and Rs. 26.50 billion at the weighted average rates of 9.10% and 9.30% respectively. 

The net liquidity deficit stood at Rs. 9.68 billion yesterday as an amount of Rs. 55.50 billion was deposited at Central Bank’s SDFR (Standard Deposit Facility Rate) of 9.00%. 

Forex market 

In the forex market, the USD/LKR rate on spot contracts closed the day marginally stronger at Rs. 307.98/308.05 against its previous day’s closing level of Rs. 308.05/308.15.

The total USD/LKR traded volume for 4 March was $ 99.20 million. 

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