Secondary bond market continues to rally; yields in free-fall

Wednesday, 28 May 2025 00:12 - - {{hitsCtrl.values.hits}}

Rs. 162.50 b T-Bill auction in focus
Rupee broadly steady

By Wealth Trust Securities

THE secondary bond market yesterday saw yields decline further, carrying over the bullish momentum from last week where the Central Bank of Sri Lanka cut the Monetary Policy Rate by 25 basis points. As a result, the rally sparked last week was seen extending for a fourth consecutive day. Aggressive buying meant that the decline in yields observed yesterday was notably sharp, supported by strong market activity and robust transaction volumes.

The 15.09.27 maturity was seen trading down the range of 8.86%-8.80%. The 15.02.28 and 15.03.28 maturities traded down the range of 9.20%-9.00%. The 01.07.28 maturity was seen trading down the range of 9.35%-9.20%. The 15.06.29, 15.09.29 and 15.12.29 maturities were seen trading down from intraday highs to lows of 9.80%-9.58%, 9.79%-9.63% and 9.82-9.62% respectively. The 15.03.31 maturity was seen trading at the rate of 10.00%. This comes ahead of the Treasury Bill auction due today, the first following the monetary policy change. The auction will have a total amount of Rs. 162.50 billion on offer, an increase of Rs. 5 billion over the previous week. This will consist of Rs. 25 billion on the 91-day maturity, Rs. 50 billion on the 182-day and Rs. 87.50 billion on the 364-day maturity.

For reference, the weekly Treasury bill auction conducted last Wednesday (21 May) was fully subscribed. The entire Rs. 157.50 billion offered was successfully raised in the 1st phase in competitive bidding. The total bids received exceeded the offered amount by 2.40 times.

The auction saw weighted average yield rates decline marginally on the longer tenors.

Accordingly, the rates on the 182-day and 364-day maturities dropped by 1 basis point each to 7.97% and 8.29% respectively. However, the 91-day maturity saw rates remain unchanged at 7.65%. The 2nd phase was also fully subscribed: 10% of the total offered amount at Phase 1 or Rs 15.75 Bn was raised, being the maximum offered.

The total secondary market Treasury Bond/Bill transacted volume for 26 May was Rs. 25.48 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 7.75% and 7.75% respectively.

The net liquidity surplus increased to

Rs. 203.24 billion yesterday. Rs. 0.25 billion was withdrawn from the Central Bank’s SLFR (Standing Lending Facility Rate) of 8.25%, while an amount of Rs. 203.49 billion was deposited at Central Bank’s SDFR (Standard Deposit Facility Rate) of 7.25%.

Forex Market

In the Forex market, the USD/LKR rate on spot contracts were seen closing the day broadly steady at

Rs. 299.80/299.87 as against Rs. 299.70/299.90 the previous day.

The total USD/LKR traded volume for 26 May was $ 65.90 million.

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

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