Secondary bond market continues to move sideways; activity improves

• Rs. 135 b offered at weekly Treasury bills auction

By Wealth Trust Securities

The secondary bond market was seen trading in a holding pattern on the back of moderately improved volumes. Trading continued to be centred on short-term maturities. The liquid 2026 tenors (01.06.26,01.08.26,15.05.26 and 15.12.26) were seen changing hands within the range of 11.38% to 11.25%. While the 2027 tenors (01.05.27 and 15.09.27) were seen trading at levels of 12.00% to 11.75%, additionally the relatively shorter 2027 tenor of 15.01.27 at 11.45%. Trades were also observed on the medium tenor bonds of 15.07.29 and 15.03.31 at the levels of 12.40% and 12.30%. As such yields were observed fluctuating in a narrow band and closing the day mostly unchanged.

The Treasury bill auction due today will see a total volume of only Rs. 135 billion on offer, an increase of Rs. 55 billion from the previous week. This will consist of Rs. 30 billion on the 91-day maturity, Rs. 60 billion on the 182-day and Rs. 45 billion on the 364-day maturities.

For context, at the weekly Treasury bill auction last Wednesday (27 March 2024), the weighted average rates were seen decreasing for the first time in five weeks, following the monetary policy rate cut. The 91-day bill recorded the sharpest dip of 16 basis points to 10.07% closely followed by the 182-day bill by 12 basis points to 10.23% and the 364-day bill by 10 basis points to 10.28%. The total offered amount of Rs.80 billion was successfully raised at the auction as the total bids received to total offer ratio was seen increasing to a five-week high of 2.31:1. An additional amount of Rs. 8.00 billion was raised at the 2nd phase. The total secondary market Treasury bond/bill transacted volume for 1 April was Rs. 6.95 billion.

In money markets, the weighted average rate on overnight call money was at 8.70% and repo was at 8.93%.

The net liquidity surplus stood at Rs. 56.60 billion yesterday as an amount of Rs. 7.85 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 9.50% against an amount of Rs. 128.21 billion deposited at Central Banks SDFR (Standard Deposit Facility Rate) of 8.50%. 

Further, the DOD (Domestic Operations Department) of the Central Bank injected liquidity by way of an overnight and 14-day reverse repo auction for Rs. 63.76 billion and Rs. 40.00 billion at the weighted average rates of 8.61% and 8.99% respectively.

Forex Market 

In the Forex market, the USD/LKR rate on spot contracts traded below Rs. 300 at a high of Rs. 299.95 yesterday, before closing the day broadly steady at Rs. 299.95/300.05.

The total USD/LKR traded volume for 1 April was $ 165.00 million. 

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