Banking and Finance

T. Bill auction yields drop for third consecutive week

Rs. 92 b fully subscribed
Secondary bond yields hold steady
Rs. 100 b Bond auctions announced
Rupee gains

By Wealth Trust Securities

At the weekly Treasury bill auction conducted yesterday, the weighted average yields were seen decreasing across all three tenors for a third consecutive week. The 91-day maturity reduced by 13 basis points to 9.90%, while the 182-day maturity decreased by 14 basis points to 10.08% and the 364-day maturity dropped by 02 basis point to 10.21%. The entire offered amount of Rs. 92.00 billion was taken up at the 1st phase, with total bids received exceeding the total offered amount by 2.33 times.

The 2nd phase of subscription, across all 3 maturities will be opened until 4:00 p.m. on the day before the settlement date (i.e., 25.04.2024) at the respective weighted averages determined at the 1st phase of the auction. Given below are the details of the auction.

The secondary bond market yesterday witnessed a marginal increase in activity, however yields held broadly steady after some sideways movement. Trades continued to be observed on the short end of the yield curve with a particular emphasis on 2025 to 2028 durations. The shorter tenor 01.07.25 bond was seen trading at 10.40%. Meanwhile, trades were observed on the 15.12.26 within the range of 11.35 to 11.34%, while the shorter tenor 01.08.26 was seen trading at 11.14%. The 2027 tenors of 01.05.27 and 15.09.27 were seen changing hands at the rates of 11.80% and 11.90% respectively. In addition, trades were seen on the 2028 tenors of 15.03.28 and 01.07.28 within the range of 12.20% to 12.15%. Overall, transaction volumes remained moderate.

Furthermore, an Rs. 100 billion upcoming round of Treasury Bond auctions were announced due to be held on 29 April. The auction will comprise of Rs. 25 billion from a bond due on 15 March 2028 bearing a coupon of 10.75%, Rs. 30 billion from a bond due on 15 May 2030 bearing a coupon of 11.00% and Rs. 45 billion from a bond due on 01 October 2032 with a coupon rate of 9.00%.

For context, the last round of Treasury bond auctions held on 08 April 2024 produced mixed results. Initially, the auction went undersubscribed, with only Rs. 38.43 billion raised at the 1st phase in competitive bidding. However, by the conclusion of the second phase, the entire amount of

Rs. 85.00 billion was successfully raised, issued at the weighted averages determined at the 1st phase across all three maturities. As a result, the total bids received exceeded the offered amount by 3.53 times.

The total secondary market Treasury bond/bill transacted volume for 22 April was Rs. 2.80 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 8.64% and 9.15% respectively while the net liquidity was a surplus Rs. 155.38 billion yesterday. An amount of Rs. 1.61 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 9.50% against an amount of

Rs. 181.76 billion deposited at Central Banks SDFR (Standard Deposit Facility Rate) of 8.50%. The DOD (Domestic Operations Department) of Central Bank injected liquidity by way of an overnight repo auction for Rs. 24.77 billion at a weighted average rate of 8.61%.

Forex Market

In the Forex market, the USD/LKR rate on spot contracts closed the day appreciating to

Rs. 297.95/298.10 against its previous day’s closing level of

Rs. 300.40/300.60.

The total USD/LKR traded volume for 22 April was

$ 54.40 million.

(References: Central Bank of Sri Lanka, Bloomberg E-Bond trading platform, Money broking companies)

Source: FT