Secondary Bond Market Yields Decline

Weekly report for the week ending 02^nd May 2025 – Courtesy Wealth Trust Securities Ltd

Secondary Bond Market Yields Decline
T-Bond Auction Records Positive Outcome
T-Bill Auction Rates Record Mixed Results
Foreign Holdings in Rupee Treasuries increases further
Rupee Appreciates

The secondary bond market for the week ending 02^nd Mar 2025 started off on a positive note and saw yields decline throughout the week despite bouts of marginal profit taking. The end of the week in particular saw a notable drop on the back of aggressive buying interest. Overall market activity and transaction volumes were seen at healthy levels. As a result, two-way quotes were seen ending the week lower.

The 15.09.27 maturity traded down the range of 9.60%-9.50% intraweek. The 15.10.28 maturity down the range of 10.05%-9.94%. The 15.09.29 and 15.12.29 maturities traded down the range of intraweek highs to lows of 10.40%-10.30% and 10.48%-10.35% respectively. The 15.03.31 maturity was seen trading down the range of 10.92%-10.80%.

The Treasury Bond auctions held last Monday (28^th April) concluded on a strong note, with the full Rs. 155.00 billion on offer successfully raised across both phases, supported by bullish sentiment in the secondary market. Yields closely matched pre-auction market rates, with total bids exceeding the offer by 2.91 times. The 15.06.29 maturity (11.75% coupon) was fully subscribed in the first phase at a weighted average yield of 10.30%. Similarly, the 15.03.31 maturity (10.25% coupon) raised its entire Rs. 55.00 billion at a yield of 10.96%. While the 15.03.35 maturity saw a lower initial subscription of 39.40% (Rs. 15.76 billion) at a yield of 11.22%, the balance was successfully raised in the second phase, resulting in a fully subscribed overall auction.

An additional amount of Rs 11.50 billion was raised at the 2^nd phase of the auction.

The weekly Treasury bill auction conducted last Tuesday (29^th April) saw the entire Rs 145.00 billion offered successfully raised at the 1^st phase, in competitive bidding. This marks the first instance in 6 straight weeks where a Treasury Bill auction was fully subscribed at the 1^st phase. Total bids received exceeded the offered amount by 1.86 times. The auction saw weighted average yield rates exhibit mixed results. Accordingly, the weighted average rates on the 91-day tenor increased by 03 basis points to 7.65% and the 364-day tenor rose by 01 basis points to 8.30%. However, the weighted average rate on the 182-day tenor declined by 01 basis points to 7.97% Maturity-wise the 91-day tenor went undersubscribed. The shortfall was bridged by the 182-day and 364-day tenors which raised more than respective offered amounts. As a result, 92%+ of the total amount raised was attributed to the longer tenor maturities.

Meanwhile, the foreign holding in Rupee Treasuries recorded a net inflow for the second consecutive week amounting to Rs 600.00 million, and as a result the total holding increased to Rs. 91.75 billion as at 30^th April 2025.

Meanwhile, the Colombo Consumer Price Index – CCPI (Base: 2021=100) for the month of April was recorded at – 2.00% on a year-on-year basis as against – 2.60% recorded in March. The annual average as at April was -1.10%.

The daily secondary market Treasury bond/bill transacted volumes for the first three days of the week averaged at Rs. 41.60 billion.

The total outstanding liquidity surplus in the inter-bank money market increased to Rs. 163.28 billion as at the week ending April 25^th, 2025, from Rs. 120.76 billion recorded the previous week. The weighted average interest rates on call money and repo were recorded within the ranges of 7.97%-7.98% and 7.98%-7.99% respectively.

The Central Bank of Sri Lankas (CBSL) holding of Government Securities was registered at Rs. 2,509.42 billion as at the May 02^nd, 2025, down from the previous week’s closing level of Rs 2,511.92.

In the Forex market, the USD/LKR rate on spot contracts was seen appreciating, to close the week at Rs. 299.48/299.52 as against the previous week’s closing level of Rs. 299.65/299.75 and subsequent to trading at a high of Rs. 299.45 and a low of Rs. 299.85.

The daily USD/LKR average traded volume for the first four trading days of the week stood at US $ 104.37 million.