Secondary Bond market yields drop; Activity robust

Monday, 19 May 2025 02:07 - - {{hitsCtrl.values.hits}}

Rs. 173 b T-Bill auction fully subscribed; rates unchanged
Money market liquidity decreases
Foreign holdings in Rupee treasuries declines
Rupee see-saws; closes down

By WealthTrust Securities

The Secondary Bond market during the holiday shortened week ending 16 May 2025 started off on a positive note and saw yields edge lower. Following the announcement that the Monetary Policy Review No. 03 of 2025—initially scheduled for 28 May—had been brought forward to Thursday, 22 May, the market rallied and yields dropped further. This positive momentum carried through the week, despite sporadic bouts of minor profit taking selling pressure. Market activity and transaction volumes were seen at robust levels. In conclusion, secondary market two-way quotes were seen closing the week lower.

Majority of the action was focused on 2028-2031 tenors. The 15.09.27 maturity was seen trading down the range of 9.27%-9.20%. The 15.02.28 and 15.03.28 maturities traded down the range of 9.80%-9.60% collectively. The yield on the 15.10.28 maturity traded down the range of 9.90%%-9.75%. Similarly, the yield on the 15.06.29 ,15.09.29 and 15.12.29 maturities declined down the ranges of 10.14%-10.07%, 10.16%-10.10% 10.24%-10.10% respectively. The 15.03.31 maturity was seen trading lower, dropping from an intraweek high of 10.68% to a low of 10.60%.

As a result, the yield curve was seen shifting lower.

The weekly Treasury bill auction conducted last Wednesday (14 May) was fully subscribed. The entire Rs. 173.00 billion offered was successfully raised at the 1st phase in competitive bidding. The total bids received exceeded the offered amount by 2.06 times. The auction saw weighted average yield rates remain unchanged from the previous week. Accordingly, the weighted average rates on the 91-day, 182-day and 364-day tenors were recorded at 7.65%, 7.98% and 8.30% respectively.

The foreign holding in Rupee Treasuries recorded a net outflow, for the second consecutive week, amounting to Rs. 1.38 billion and as a result the total holding reduced to Rs. 89.68 billion as at 15th May 2025.

The daily secondary market Treasury bond/bill transacted volumes for the first two days of the week averaged at Rs. 56.64 billion.

The total outstanding liquidity surplus in the inter-bank money market reduced to Rs. 157.85 billion as at the week ending 16 May, from Rs. 194.50 billion recorded the previous week. The weighted average interest rates on call money and repo were recorded within the ranges of 7.96%-7.99% and 7.97%-8.00% respectively.

The Central Bank of Sri Lanka’s (CBSL) holding of Government Securities was registered at

Rs. 2,509.42 billion as at 16 May, unchanged from the previous week’s closing level.

Forex market

In the Forex market, the USD/LKR rate on spot contracts was seen depreciating, to close the week at Rs. 299.10/299.30 as against the previous week’s closing level of Rs. 298.85/298.95 and subsequent to trading at a high of Rs. 298.45 and a low of Rs. 299.25.

The daily USD/LKR average traded volume for the first two trading days of the week stood at $ 100.39 million.

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

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