Secondary Bond Market: Yields Edge Down on Shorter Tenors

Weekly report for the week ending 06^th June 2025 – Courtesy Wealth Trust Securities Ltd

Secondary Bond Market: Yields Edge Down on Shorter Tenors
Foreign Buying Continues for a 3^rd Consecutive Week
Rs 167.50 Bn T Bill Auction Fully Subscribed; Rates Continue to Decline
Money Market Liquidity Reduces
Rupee Steadily Appreciates

The secondary bond market last week was initially characterized by yields moving mostly sideways, fluctuating within a narrow band. This period of consolidation followed the bull run triggered by the policy rate cut announced on May 22nd. Sporadic bouts of profit taking pressure were witnessed, however they were curtailed by strong buying interest at the higher levels. Two-way quotes closed lower, with yields trending down mainly on shorter tenor bonds. This positive sentiment was supported by the midweek Treasury Bill auction, where the weighted averages of longer-tenor securities declined, reinforcing the downward pressure on yields.

The 15.03.28 maturity traded down from an intraweek high of 8.85% to a low of 8.70%. The 01.05.28 and 01.07.28 maturities were seen transacting at the rates of 8.85% and 8.92%-8.72%. The 15.10.28 maturity traded 9.00%-8.85%. The 15.06.29, 15.09.29 and 15.12.29 maturities were seen trading within the ranges of 9.55%-9.40%, 9.62%-9.45% and 9.63%-9.50%. The 15.12.32 maturity traded between 10.30%-10.20%. The 15.09.34 traded within the range of 10.49%-10.40% and the 15.03.35 maturity between 10.50-10.52%.

The weekly Treasury bill auction conducted last Wednesday (04^th June) was fully subscribed. The entire Rs 167.50 billion on offer successfully raised in the 1^st phase in competitive bidding. The total bids received exceeded the offered amount by 1.99 times. The weighted average yield rate on the 182-day tenor declined by 4 basis points to 7.77%, and the 364-day tenor also fell by 4 basis points to 7.94%. However, the weighted average yield rate on the 91-day tenor remained steady at 7.55%. An additional amount of Rs. 16.75 billion being the maximum aggregate amount offered was raised at the 2^nd phase across all three maturities at the weighted averages determined at the 1^st phase.

Meanwhile, the foreign holding in Rupee Treasuries recorded a net inflow for the third consecutive week, amounting to Rs 2.74 billion and as a result the total holding increased to Rs. 95.45 billion as at 29^th May 2025.

The daily secondary market Treasury bond/bill transacted volumes for the first four days of the week averaged at Rs. 37.41 billion.

The total outstanding liquidity surplus in the inter-bank money market decreased to Rs. 173.74 billion as at the week ending June 06^th, 2025, from Rs. 203.79 billion recorded the previous week. The weighted average interest rates on call money and repo were recorded within the ranges of 7.71%-7.75% and 7.73%-7.76% respectively.

The Central Bank of Sri Lankas (CBSL) holding of Government Securities was registered at Rs. 2,508.92 billion as at the June 06^th, 2025, a marginal decrease over the previous week’s closing level.

In the Forex market, the USD/LKR rate on spot contracts was seen appreciating, to close the week at Rs. 299.10/299.20 as against the previous week’s closing level of Rs. 299.50/299.60 and subsequent to trading at a high of Rs. 299.13 and a low of Rs. 299.60.

The daily USD/LKR average traded volume for the first four trading days of the week stood at US $ 70.25 million.