Yields edge up further at weekly Treasury bill auction

• Secondary bond market activity remains moderate; yields edge up
• Rupee marginally appreciates further

By Wealth Trust Securities 

At the weekly Treasury bill auction conducted yesterday, the weighted average yields were seen increasing across all three maturities, for a second consecutive week. Prior to this, rates had been on a steady decline, with a bull run that saw decreases observed in at least one tenor since August 2023. The 91-day maturity increased by nine basis points to 9.96%, the 182-day maturity increased by 13 basis points to 10.08%, while the 364-day maturity also went up by nine basis points to stand at 10.14%. The auction saw the entire offered amount of Rs. 160 billion been fully subscribed, for the first time in two weeks, at the first phase of the auction. The total bids received exceeded the total offered amount by 1.45 times.

The second phase of subscription, on the 182-day and 364-day maturities will be opened until 4 p.m. on the day before the settlement date (i.e., 07.03.2024) at the respective weighted averages determined at the first phase of the auction.

Meanwhile, the secondary bond market yesterday saw activity remain moderate on the back of relatively slim volumes. Yields were initially seen edging down but subsequent to the auction outcome, moved up. Despite this fluctuation, the market was seen trading sideways within a narrow band. Activity was centred on the short end of the yield curve. Accordingly, trades were observed on the 2026 tenors (01.06.26, 01.08.26 and 15.12.26), 01.07.28 and 15.05.30 maturities within the ranges of 10.95% to 10.80%, 10.25% and 12.48% to 12.41%. However, the 2027 tenors (01.05.27 and 15.09.27) were seen moving up significantly from lows of 11.70% to highs of 11.90%. Additionally, trades were observed on the relatively shorter 2026 tenor of 01.02.26 at the rate of 10.60% and relatively shorter 2028 tenor of 5.03.28 at the rate of 12.10%. In conclusion, two-way quotes moved up higher by the end of trading. This was against the backdrop of the publication of the maturity details of the upcoming Rs. 270 billion Treasury bond auction.

In secondary market bills, May 2024 maturities were seen changing hands at levels of 10% to 9.90% on the back of considerable volumes prior to the auction announcement. Similarly, March/April 2024 maturities were seen trading within the range of 9.90% to 9.45% also on the back of substantial volumes.

The total secondary market Treasury bond/bill transacted volume for 5 March was Rs. 25.06 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 9.17% and 9.22% respectively while the net liquidity surplus stood at Rs. 55.66 billion yesterday.

An amount of Rs. 100.51 billion was deposited at Central Bank’s SDFR (Standing Deposit Facility Rate) of 9%. The DOD (Domestic Operations Department) of Central Bank injected liquidity by way of an overnight repo auction for Rs. 44.85 billion at the weighted average rate of 9.13%.

Forex Market

In the Forex market, the USD/LKR rate on spot contracts closed the day appreciating to Rs. 307.80/307.88 against its previous day’s closing level of Rs. 307.98/308.05.

The total USD/LKR traded volume for 5 March was $ 109.30 million.

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