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Daily report for the 22nd May 2025 – Courtesy Wealth Trust Securities Ltd
- Overnight Policy Rate Cut by 25 Basis Points
- Secondary Bond Market Yields Closes Down
- Rupee Appreciates
At the 03rd Monetary Policy Review for 2025, the Central Bank of Sri Lanka (CBSL) yesterday announced that it had decided to cut the Overnight Policy Rate by 25 basis points to 7.75%. This marks the first cut since the OPR was introduced in November 2024. In addition, the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR), which are linked to OPR with pre-determined margins of ± 50 basis points, were also revised downwards by 25 basis points to 7.25 per cent and 8.25 per cent, respectively. However, the statutory reserve rate was left unchanged at 2.00%.
In the secondary bond market, rates were seen initially dropping in a knee-jerk reaction to the monetary policy announcement. However, the momentum shifted as profit-taking selling pressure saw yields pushed back up. Nevertheless, secondary market two-way quotes were seen closing the day marginally lower. Market activity and transaction volumes were seen at healthy levels.
The 01.06.26 and 01.08.26 maturity saw yields drop from 8.35%-8.30% and 8.43%-8.35% respectively. The 01.05.27 and 15.12.27 maturities were seen trading at the rates of 9.05% and 9.20% respectively. The 15.10.28 traded within the range of 10.75%-10.80%.
The 15.06.29, 15.09.29 and 15.12.29 maturities were seen hitting intraday lows of 10.05%, 10.11% and 10.10% before moving back up to trade at intraday highs of 10.10%, 10.18% and 10.20% respectively. However, towards the close of business sentiment again recovered and rates closed marginally lower. This U-shaped trading pattern was observed across the yield curve from tenors 2028 and beyond. The 15.03.31 maturity traded within the range of 10.55%-10.60%. The 01.10.32 maturity traded at the rate of 10.75% and the 01.11.33 maturity traded within the range of 10.92%-10.8725% respectively.
The total secondary market Treasury bond/bill transacted volume for 25th March 2025 was Rs. 25.50 billion.
In money markets, the weighted average rates on overnight call money and Repo were seen dropping to record at 7.74% and 7.75% respectively as against 7.98% and 7.98% the day prior in line with the Monetary Policy decision.
The net liquidity surplus stood at Rs. 173.67 billion yesterday. Rs. 7.68 billion was withdrawn from the Central Banks SLFR (Standing Lending Facility Rate) of 8.25%, while an amount of Rs. 181.35 billion was deposited at Central Banks SDFR (Standard Deposit Facility Rate) of 7.25%.
Forex Market
In the Forex market, the USD/LKR rate on spot contracts closed the day appreciating to Rs. 299.35/299.45 as against its previous day’s closing level of Rs. 299.60/299.65.
The total USD/LKR traded volume for 21st May 2025 was US $ 150.75 million.
(References: Central Bank of Sri Lanka, Bloomberg E-Bond trading platform, Money broking companies)