Secondary bond market yields drop on robust demand

• Rupee continues to appreciate

By Wealth Trust Securities

The secondary bond market yesterday witnessed a surge in activity with yields declining on strong buying interest. Rates were seen stabilising at lower levels, despite some marginal profit taking interest. Trading continued to be centred on the short end of the yield curve with a particular emphasis on 2026-2028 tenors on the back of an increase in transaction volumes. 

Accordingly, the yield on the liquid 2026 tenor of 15.12.26 was seen dropping to an intraday low of 11.28% from its intraday high of 11.35% on the back of healthy demand. Similarly, the relatively shorter 2026 tenors of 15.05.26 and 01.08.26 were seen trading at 11.20% and 11.15% respectively. Likewise, the liquid 2027 tenors of 01.05.27 and 15.09.27 were seen declining to intraday lows of 11.65% and 11.70% respectively from its intraday highs of 11.70% and 11.85% respectively. The popular 15.03.28 tenor saw considerable demand in particular which led it to its yield dropping to an intraday low of 12.00%, down from its opening highs of 12.15%. This interest was also reflected on the other 2028 tenors of 01.05.28, 01.07.28 and 15.12.28 which changed hands within the range of 12.20% to 12.10%. Additionally, trades were observed on the short tenor 15.01.25 and 01.07.25 at the rates of 10.15% and 10.30% respectively as well.

The total secondary market Treasury bond/bill transacted volume for 24 April was Rs. 26.97 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 8.65% and 9.03% respectively. The DOD (Domestic Operations Department) of Central Bank injected liquidity by way of an overnight repo auction for Rs. 19.43 billion at a weighted average rate of 8.59%. The net liquidity surplus stood at Rs. 145.67 yesterday. An amount of Rs. 3.41 billion was withdrawn from the Central Banks SLFR (Standing Lending Facility Rate) of 9.50% as against Rs. 168.50 billion been deposited at Central Banks SDFR (Standard Deposit Facility Rate) of 8.50%. 

Forex Market 

In the Forex market, the USD/LKR rate on spot contracts closed the day higher at  Rs. 296.85/297.00 against its previous day’s closing level of Rs.297.95/298.10.

The total USD/LKR traded volume for 24 April was $ 55.63 million. 

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