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Daily report for the 26th November 2024 – Courtesy Wealth Trust Securities Ltd
- Secondary Bond Market Yields Drop Ahead of Monetary Policy Announcement
- Rs 125.00 Bn Treasury Bill Auction in Focus
- Rupee appreciates slightly
The Secondary Bond Market yesterday turned bullish and rallied, with a surge in activity and sizeable volumes transacted. Yields were seen declining steeply on the back of strong demand. This was in stark contrast to the virtual standstill seen the day prior. This optimism followed Sri Lanka’s announcement of the launch of an exchange for its outstanding International Sovereign Bonds, totaling approximately USD 12.55 billion, after receiving Cabinet approval.
The 15.12.26 maturity saw yields decline from 10.17%-10.00%. The yield on the 15.09.27 and 15.12.27 maturities were seen declining from intraday highs to lows of 10.81%-10.73% and 10.93%-10.80% respectively. The 2028 tenors followed suit with the bulk of the trading focused on these maturities. The yield on the 15.02.28 and 15.03.28 maturities declined from 11.15% to 10.95% intraday. The 01.05.28, 15.10.28 and 15.12.28 maturities traded down the ranges of 11.15%-11.00%, 11.20%-11.12% and 11.25%-11.05%. The 15.09.29 maturity was observed trading down the range of 11.35%-11.30%. In addition, the medium tenor 01.12.31 maturity changed hands down the range of 11.65%-11.55%.
The 6th and final monetary policy announcement for 2024 is scheduled for today, 27th November, at 7:30 AM. At the 5th (previous) monetary policy review on 27th September 2024, the Central Bank of Sri Lanka paused its easing cycle, maintaining the following key rates:
- Standing Deposit Facility Rate (SDFR): 8.25%
- Standing Lending Facility Rate (SLFR): 9.25%
- Statutory Reserve Ratio (SRR): 2.00%
The Central Bank of Sri Lanka has reduced policy rates by a cumulative 725 basis points, since easing began in June 2023.
Meanwhile, Bloomberg in an article titled “SRI LANKA PREVIEW: 25-Bp Cut Likely to Counter Rising Real Rates” opined that The Central Bank of Sri Lanka is likely to cut its standing deposit and lending rates by 25 basis points to 8.0% and 9.0%, respectively at the upcoming monetary policy review due today (27th of November). The report cited persistent deflation, high real interest rates (above historical averages), strong FX reserves – exceeding the IMF’s end-2024 target and a delay in the 2025 budget as reasons.
This comes ahead of the Treasury bill auction also due today, which will have a total amount of Rs. 125.00 billion on offer, a decrease of Rs. 20.00 billion over the previous week. This will consist of Rs. 45.00 billion on the 91-day, Rs 45.00 billion on the 182-day and Rs. 35.00 billion on the 364-day maturities.
For reference, at the weekly Treasury Bill auction held last Wednesday: weighted average rates were seen declining across the board for a second consecutive week. Accordingly, the rates on the 91-day tenor decreased by 05 basis points to 9.30%, the 182-day tenor dropped by 04 basis points to 9.60% and the 364-day tenor declined by 10 basis points to 9.78%. Total bids received exceeded the offered amount by 2.27 times, and the entire Rs 145.00 billion on offer was successfully raised at its 1st phase. In addition, an amount of Rs 14.50 billion being the maximum amount offered was raised at the 2nd phase out a total market subscription of a staggering Rs 89.14 billion.
The total secondary market Treasury bond/bill transacted volume for 25th November was Rs. 7.18 billion.
In money markets, the weighted average rates on overnight call money and Repo stood at 8.55% and 8.68% respectively. The DOD (Domestic Operations Department) of Central Bank injected liquidity by way of an overnight and 7-day term reverse repo auctions for Rs. 20.88 billion and Rs 40.00 billion at the weighted average rate of 8.43% and 8.70% respectively.
The net liquidity surplus stood at Rs. 140.65 billion yesterday. No funds were withdrawn from the Central Banks SLFR (Standing Lending Facility Rate) of 9.25%, while an amount of Rs. 201.52 billion was deposited at Central Banks SDFR (Standard Deposit Facility Rate) of 8.25%.
Forex Market
In the Forex market, the USD/LKR rate on spot contracts closed the day appreciating marginally to Rs. 291.10/291.20 as against 291.25/291.35 the previous day.
The total USD/LKR traded volume for 25th November was US $ 59.26 million.
(References: Central Bank of Sri Lanka, Bloomberg E-Bond trading platform, Money broking companies)
