Secondary Bond market yields continue to climb; activity grinds to standstill

Tuesday, 8 April 2025 00:14 - - {{hitsCtrl.values.hits}}

Liquidity hits Rs. 200 b for the first time in 2025; Rupee reappreciates

By Wealth Trust Securities

The Secondary Bond market yesterday started off the week on a bearish note with yields seen increasing further, carrying over the upward momentum from the week prior. The sell-off was largely concentrated on 2027-2029 tenors which saw a drastic increase in yields. This mirrored the risk off sentiment in the local equity market and global financial markets in the aftermath of the imposition of ‘Reciprocal Tariffs’ by the US. Activity and transaction volumes were seen at healthy levels earlier in the day but grinded to a virtual standstill apart from some sparse trades as the day progressed. Market participants were seen adopting a wait-and-see approach amidst the global headwinds.

The yield on the 15.09.27 maturity increased from an intraday low of 9.90% to an intraday high of 10.00%. The 15.12.27 maturity traded at the elevated level 10.05%. The 15.02.28 and 15.03.28 maturities were seen trading up the ranges of 10.10%-10.20% and 10.20%-10.25%. The 01.05.28 and 01.07.28 maturities changed hands up the ranges of 10.29-10.35% collectively. The 15.10.28 and 15.12.28 maturities were seen trading up the range of 10.45%-10.55% collectively. The yield on the 15.12.29 maturity moved up from an intraday low of 10.65% to an intraday high of 10.80%.

This spike in yields coincided with the announcement of the details of the upcoming round of Treasury Bond auctions due on 10 April (this Thursday).

The auctions will be comprised of:

Rs. 75.00 billion from a 15 December 2029 Maturity bearing a coupon rate of 11.00%
Rs. 25.00 billion from a 15 December 2034 Maturity bearing a coupon rate of 10.25%

The settlement for which will be on 16 April 2025.

The total secondary market Treasury Bond/Bill transacted volume for 4 April was Rs. 12.39 billion.

In the money market, the net liquidity surplus stood at Rs. 202.83 billion yesterday, crossing Rs. 200 billion mark for the first-time since 16 December 2024. Rs. 0.15 billion was withdrawn from the Central Bank’s SLFR (Standing Lending Facility Rate) of 8.50%, while an amount of Rs. 202.98 billion was deposited at Central Bank’s SDFR (Standard Deposit Facility Rate) of 7.50%.

The weighted average rates on call money and repo were registered at 7.94% and 7.98% respectively.

Forex market

In the Forex market, the USD/LKR rate on spot contracts closed the day depreciating to Rs. 297.70/298.20 as against Rs. 296.65/296.75 the previous day.

The total USD/LKR traded volume for 4 April was $ 69.33 million.

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