Government Securities Market (Week ended July 8, 2022)

10 July, 2022

The secondary bond market was at a standstill during the week ending July 8 as the weekly Treasury Bill auction rates was seen skyrocketing, continuing the steep upward trend witnessed in primary market rates during the previous week.

In limited trades, persistent selling interest prior to the weekly bill auction saw the liquid maturity of 01.06.25 changing hands within the range of 25.00% to 25.25% against its previous weeks closing level of 24.00/50. However, activity came to a standstill following the auction results, where weighted average rates on all three maturities increased by a minimum 400 basis points (B.P) to exceed 28.00%, a level not witnessed over the past 25 years. This led to an upward shift of the overall yield curve due to two way quotes on the rest of the yield curve increasing.

The Central Bank of Sri Lanka increased its policy rates by only 100 basis points at its fifth review meeting held subsequently to the weekly bill auction, reactivating the secondary bill market.

The latest 182-day and 364-day maturities which traded at highs of 30% each was seen dipping to lows of 27% each while the full quota of Rs.17.5 billion offered at the phase II of the auction was fully taken up.

Treasury bond auctions due Monday will see a total volume of Rs.70 billion on offer, consisting of Rs. 30 billion of a 01.06.2025 maturity and Rs. 40 billion of a new 15.07.2029 maturity.

The weighted average yields at the bond auctions conducted on 28th June 2022 were 23.77%, 21.18% and 20.74% on the same 01.06.25, 15.01.28 and 15.05.31 maturities. An amount of Rs.52.25 billion was accepted on the 01.06.25 maturity while additional amounts of Rs.3.52 billion and Rs.12.00 billion was taken up under its direct Issuance windows on the 15.01.28 and 15.05.31 maturities.

In money markets, the base rate increase resulted in weighted average rates on overnight call money and repo increasing during the last two trading days of the week to average 15.50% each, as against its first three days 14.50%. The total outstanding liquidity deficit decreased during the week to register Rs.630.34 billion by the end of the week against its previous weeks Rs.648.34 billion.

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

Courtesy: Wealth Trust Securities Ltd

– Sunday Observer Sri Lanka

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