Secondary bond market activity moderates; yields edge up

• CCPI falls to 5.90% YoY in February
• Rupee on a roll; 3rd best performing globally as per Bloomberg

By Wealth Trust Securities

The secondary bond market yesterday was dull, with relatively subdued activity and yields edging up. The market was virtually at a standstill for much of the day. However, notably some trades were observed on medium tenor bonds, as opposed to usually predominantly being on the short end of the yield curve in prior trading sessions. Accordingly, 15.07.29, 15.05.31 and 01.07.32 were seen changing hands at levels of 12.37% to 12.35%, 12.55% and 13.00% respectively. In addition, 2027 tenors (01.05.27 and 15.09.27) and 01.07.28 were traded at 12.00% to 11.98% and 12.30% to 12.25% as well.

On the inflation front, the CCPI or Colombo Consumer Price Index - CCPI (Base: 2021=100) for the month of February 2024 was recorded at 5.90%, cooling on its point to point as against 6.40% recorded in January. The CCPI was seen decelerating for the first time since September 2023. This is attributable to a significant moderation in food prices which had previously surged last month and benefitting from a stronger currency. 

The total secondary market Treasury bond/bill transacted volume for 28 February was Rs. 52.96 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 9.21% and 9.46% respectively while the net liquidity stood at a surplus of Rs. 9.03 billion yesterday.

The DOD (Domestic Operations Department) of Central Bank injected liquidity by way of an overnight reverse repo auction for Rs. 47.84 billion at the weighted average rate of 9.17%. An amount of Rs. 3.26 billion was withdrawn from Central Bank’s SLFR (Standing Lending Facility Rate) of 10.00 while an amount of Rs. 42.07 billion was deposited at the SDFR (Standing Deposit Facility Rate) of 9.00%.

Forex Market 

In the Forex market, the USD/LKR rate on spot contracts closed the day appreciating further to Rs. 309.50/309.70 yesterday, against its previous day’s closing level of Rs. 310.00/310.15. As per Bloomberg, Sri Lanka’s rupee is the third-best performing currency so far in 2024, gaining around 4.4%.

The total USD/LKR traded volume for 28 February was $ 53.42 million. 

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