Secondary Bond market buying frenzy continues; yields drop further

Friday, 30 May 2025 00:06 - - {{hitsCtrl.values.hits}}

Rs. 200 b T-Bond auction fully subscribed
Rupee appreciates marginally

By WealthTrust Securities

The Treasury Bond auction held yesterday (29 May) concluded on a resoundingly bullish note, with the full Rs. 200 billion on offer successfully raised at the first phase in competitive bidding. Total bids exceeded the offer by 2.65 times – an impressive outcome given the scale of the auction.

The 01.07.28 maturity (09.00% coupon) was fully subscribed in the first phase at a weighted average yield of 8.85%. For reference this was well below its secondary market two-way quote of 8.93%/8.97% just prior to the auction.

The 15.12.29 maturity (11.00% coupon) raised the entire maturity-wise offered amount of Rs. 80.00 billion at a yield of 9.47%. This was in line with market expectations as the maturity was seen quoted at the rate of 9.40/9.50% just prior to the auction.

Similarly, the 15.09.34 maturity (10.25% coupon) also raised the entire maturity-wise offered amount of Rs. 80.00 billion at a yield of 10.46%. A remarkable outcome with a relatively narrow term spread over a 15.12.32 maturity which was quoted at the rate of 10.00%/10.15% just prior to the auction.

The Secondary Bond market yesterday continued to rally for the sixth consecutive day following the announcement of the CBSL slashing the Overnight Policy rate by 25 basis points. Aggressive buying interest was seen driving yields even lower, with auction maturities quoted/traded below the weighted averages determined at the auction. Market activity and transaction volumes were seen at strong levels with some notable block trades taking place.

The 01.05.27 and 15.09.27 maturities were seen trading down the ranges of 8.35%-8.25% and 8.52%-8.45% respectively. The 15.03.28 maturity was seen trading down the range of 8.83%-8.70%. The 01.07.28 auction maturity was seen trading at the rate of 8.80%, below the auction determined weighted average. The 15.10.28 maturity was seen trading within the rates of 8.85%-8.83%. The 15.12.29 maturity traded at an intraday low of 9.35% as against an opening high of 9.51% and a weighted average of 9.47% determined at the auction. The 15.09.34 maturity traded at an intraday low of 10.40% as against its weighted average rate of 10.46% determined at the auction.

The total secondary market Treasury Bond/Bill transacted volume for 28 May was Rs. 125.317 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 7.74% and 7.76% respectively.

The net liquidity surplus stood at Rs. 207.94 billion yesterday. An amount of Rs. 0.19 billion was withdrawn from the Central Bank’s SLFR (Standing Lending Facility Rate) of 8.50%, while an amount of Rs. 208.13 billion was deposited at Central Bank’s SDFR (Standard Deposit Facility Rate) of 7.50%.

Forex market

In the Forex market, the USD/LKR rate on spot contracts closed the day appreciating marginally to Rs. 299.35/299.45 as against 299.45/299.65 the previous day.

The total USD/LKR traded volume for 28 May was $ 138.80 million.

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

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