T-Bill yields continue downward trajectory for 8th straight week; auction fully subscribed  

• Bond market yields see-saw; activity remains robust 

By Wealth Trust Securities 

The Treasury Bill weighted averages extended their slide at this week’s auction, marking an eighth consecutive week of declines as robust demand continued to drive yields lower across all three tenors.

The sharpest moves were seen at the short end, with double-digit drops. The 91-day yield fell 10 basis points to 8.96%, while the 182-day bill declined by 17 basis points to 9.27%. The 364-day bill eased by 8 basis points to 9.81%.

The Public Debt Management Office (PDMO) successfully raised the entire Rs. 80 billion offered, with each tenor meeting its targeted allocation. Total bids received amounted to 2.54 times the offer.

The Phase II subscription across all three maturities is now open until 3:00 p.m. today (3) at the Weighted Average Yield Rates (WAYRs) determined at the auction (see table for auction details). 

The secondary Bond market yesterday saw yields initially move higher on the back of profit-taking pressure, as well as news that renewed hostilities in the Middle East had pushed up oil prices, reflecting a broader global trend of rising yields on Government securities.

However, subsequently the Bond market staged a partial recovery following the bullish outcome at the Treasury Bill auction and renewed buying interest at the elevated yield levels.

Overall, secondary market yields closed higher than the previous day’s levels, while activity and transaction volumes remained elevated amid the prevailing market fluctuations.

The 01.05.28 maturity traded at the rate of 10.07%. The 15.10.30 maturity traded higher, hitting an intraday high of 10.65% before recovering to 10.55%. The 01.08.30 traded at 10.50%, while the 15.03.31 maturity hit an intraday high of 10.70%, up from a low of 10.55%, before easing back down to trade at 10.65%. The 15.12.32 traded up the range of 11%-11.05%. 

The see-saw movement was most pronounced at the belly of the yield curve, where the 01.06.33 and 01.11.33 maturities traded from lows of 11.30% and 11.33%, respectively, before both reaching intraday highs of 11.55% and subsequently recovering to trade back down to 11.35% and 11.40% respectively. A similar pattern was observed on the 15.10.34 maturity, which rose to an intraday high of 11.75% from a low of 11.60% earlier in the day, before recovering to trade back down at 11.60%.

On the medium to longer end the 15.08.36 maturity traded up, in the range of 11.80%-11.87%. 

In the money market, the net liquidity surplus was recorded at Rs. 122.05 billion. Rs. 87.43 billion was deposited at the Central Bank’s SDFR (Standing Deposit Facility Rate) of 8.25% as against an amount of Rs. 0.38 billion drawn 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 mopped out Rs. 30 billion by way of an overnight repo auction at a weighted average yield of 8.71%, Rs. 5 billion through a 7-day term repo auction at the weighted average yield of 8.75% as well as Rs. 10 billion through a 29-day term repo auction at the weighted average yield of 9.14%. 

The weighted average yields on overnight call money and repos were recorded at 8.85% and 8.91% respectively.

Forex market 

The USD/LKR rate on spot contracts was seen closing at Rs. 328.30/328.70 yesterday, with the Rupee depreciating from Rs. 328/328.10 recorded on the previous day. 

The total USD/LKR traded volume for 1 September amounted to $ 48.65 million. 

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