Secondary Bond market yields see-saw; close lower

• Rs. 100 b T-Bill auction in focus

By Wealth Trust Securities

The secondary Bond market yesterday initially saw yields move higher on the back of selling interest during the morning session. However, strong buying interest emerged at the elevated yield levels, providing firm support and absorbing the selling pressure, thereby curtailing the upward momentum. This subsequently paved the way for a recovery, with yields reversing their earlier increases to close lower across the curve.

In the trade summary, on the very short end of the curve, the 15.12.26 and 15.01.27 maturities traded down the range of 9.50%-9.42% and 9.50% respectively. The 01.07.30 maturity hit an intraday high of 11.65% before recovering to trade back down to a low of 11.55%. The 01.02.31 maturity followed a similar pattern initially hitting an intraday high of 11.80% before trading down to a low of 11.70% while the 01.12.31 traded down from a high of 11.95% to a low of 11.85%. The 15.01.33 maturity hit an intraday high of 12.30% and then recovered to trade at a low of 12.20%. The 15.06.34 and 15.09.34 maturities traded to an intraday high of 12.55% each before recovering to close the day at quotes of 12.40%/12.50% and 12.45%/12.50% respectively.

The Treasury Bill auction scheduled for today will have a total of Rs. 100 billion on offer, comprising of Rs. 40 billion on the 91-day maturity, Rs. 35 billion on the 182-day maturity and Rs. 25 billion on the 364-day maturity. The amount on offer is below the estimated Rs. 107.70 billion in maturities corresponding to the auction.

For context, at the weekly Treasury Bill auction conducted last Wednesday (14), weighted average yields were seen holding broadly steady with the rate on the 182-day and 364-day tenors remaining unchanged at 9.44% and 9.95% respectively while the 91-day tenor maturity saw its yield increase by 04 basis points to 9.30%.

The Public Debt Management Office (PDMO) raised only Rs. 66.13 billion or 73.47% in total out of the Rs. 80 billion offered in total. The 91-day tenor recorded acceptance above its respective target allocation, while the 182-day and 364-day recorded acceptances below their respective offered amounts.

Total bids received amounted to 2.01 times the overall offer.

Following the auction, a further Rs. 7.21 billion was raised through the Treasury Bill phase 2 issuance at the weighted average yields determined at the auction, bringing the total value of Treasury Bills issued during the week to Rs. 73.33 billion.

In the money market, the net liquidity surplus was recorded at Rs. 128.29 billion yesterday. Of this, Rs. 78.30 billion was deposited at the Central Bank’s SDFR (Standing Deposit Facility Rate) of 8.25%, while Rs. 0.01 billion was withdrawn from the Central Bank’s SLFR (Standing Lending Facility Rate) of 9.25%.

In addition, the Domestic Operations Department (DOD) of the Central Bank of Sri Lanka absorbed Rs. 50.00 billion via an overnight repo auction at the rate of 8.75%.

The weighted average yields on overnight call money and repos were recorded at 9.00% and 9.04% respectively.

Forex market 

The USD/LKR spot rate or the rupee closed at Rs. 331.60/331.70 yesterday unchanged against its previous day’s close.

The total USD/LKR traded volume for 19 October amounted to $ 33.25 million. 

(References: Public Debt Management Office - Ministry of Finance, Central Bank of Sri Lanka, Bloomberg E-Bond Trading Platform, Money Broking Companies)