- Bond market turns bullish
- Money market deficit continues to increase
The secondary bond market yield curve recorded a shift downwards during the week ending 03rd December 2021 on the back of renewed buying interest driven by the continued positive outcomes of primary auctions.
At the weekly Treasury bill auction, the total auctioned amount of Rs.60 billion was fully subscribed for seventh consective week while the weighted average rate of the 91 day bill decreased by a further 30 basis points to 7.23%. The weighted averagre rates of the 182 day abd 364 day bills decreased by 05 and 04 basis points respectievly as well while the accepted amount on the 182 day maturity was seen exceeding the 91 day for the first time in 29 weeks.
At the Treasury bond auctions, the total offered amount of Rs.30 billion was fully accepted at its 1st phase of the auctions while the weighted averages were recorded marginally below its secondary market rates while a further amount of Rs.3 billion was successfully issued under the Direct Issuance window on the 15.05.2030 maturity.
On the back of increased activity, considerable buying interest on the liquid maturities 01.12.24, 15.03.25, 15.01.26, 15.01.27, 01.09.28, 15.05.30 and 15.03.31 saw its yields dip to lows of 9.00%, 9.48%, 10.02%, 10.30%, 11.15%, 11.50% and 11.78% respectively against its previous weeks closing levels of 9.35/45, 9.70/90, 10.30/45, 10.70/85, 11.30/50, 11.50/70 and 11.80/88. Furthermore, 2023’s (i.e. 15.05.23, 15.07.23, 01.09.23 & 15.12.23) and other 2024’s (i.e. 15.03.24 & 15.09.24) were seen changing hands from highs of 8.75% and 9.30% respectively to lows of 8.35% and 8.95%. In secondary market bills, December 2021, Janaury to March 2022 and June 2022 maturities changed hands at levels of 6.75%, 7.00% to 7.40% and 7.64% to 7.93% respectively.
This was on the back drop of the Colombo Consumer Price Index (CCPI – Base 2013=100) increasing to its highest level since its rebase in January 2015 to record 9.9% on its point to point for the month of November when compared against its previous month’s figures of 7.6%.
The foreign holding in rupee bonds decreased marginally to Rs.1.75 billion for the week ending 01st December while the daily secondary market Treasury bond/bill transacted volumes for the first four trading days of the week averaged Rs.15.44 billion.
In money markets, the total outstanding liquidity deficit continued to increase during the week to register at Rs.319.30 billion by the end of the week against its previous weeks Rs.282.99 billion while CBSL’s holding of Gov. Securities continued to decrease to record Rs.1,414.67 billion against its previous weeks of Rs.1,433.91 billion. The weighted average rates on overnight call money and repo was 5.92% and 5.96% respectively for the week.
The Domestic Operations Department (DOD) of Central Bank was seen draining out liquidity during the week by way of overnight to 7 day repo auctions at weighted average yields ranging from 5.97% to 5.99%. Furthermore, an amount of Rs.7.10 billion was sold by way of outright sales of Treasury bills for periods ranging from 77 days to 98 days at weighted averages ranging from 7.08% to 7.23%.
USD/LKR
In the Forex market, the USD/LKR rate on spot contracts continued to trade at Rs.203.00 during the week while overall activity remained moderate.
The daily USD/LKR average traded volume for the first four trading days of the week stood at US $ 66.96 million.
(References: Central Bank of Sri Lanka, Bloomberg E-Bond trading platform, Money broking companies)