Central Bank maintains policy rates at current level

Weekly Government Securities Market
29 January, 2023

Buying interest continued to dominate the secondary market as yields plunged down at the weekly bill auction as a result secondary market yield curve budged lower predominantly on the belly end. Meanwhile, at the Central Bank (CBSL) monetary policy review meeting, it was decided to maintain the policy rates at the existing levels.

The week opened on a buoyant note as investors continued to display a strong buying appetite following the positive developments on the debt restructuring front as India and China affirmed their support.

The market witnessed investor interest largely on 2026 and 2027 maturities while recording high volumes. Meanwhile, CBSL at its first monetary policy review meeting for the year, has decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) at their current levels of 14.50% and 15.50%, after considering the recent and expected developments in the domestic and global economy and macroeconomic projections.

At the bill auction, the total offered T-Bill amount of Rs. 120.0 bn was fully accepted with 03M bill getting accepted beyond the offered. Accordingly, the weighted average yields fell across the board with 3M dipping below 30.00% and recording at 29.91% (-17bps) while 6M and 1 Yr recorded at 28.72% (-35bps) and 27.78% (47bps).

In the Forex market, the Rupee slightly appreciated against the green back with the rupee recording Rs. 362.1 compared to Rs. 362.3 recorded at the beginning of the week.

Liquidity and CBSL Holdings

Market Liquidity remained negative and deteriorated during the week. At the beginning, excess liquidity was recorded at Rs. -134.1 bn and declined to Rs. -166.6 bn by the end of the week. Meanwhile, CBSL holdings declined to Rs. 2,549.0 bn compared to Rs. 2,594.3 bn held at the beginning of the week.

Foreign Interest

Foreign holding in government securities declined slightly by Rs. 1.6 mn to Rs. 25.4 bn while foreign holding percentage was maintained at 0.2%.

Maturities for next week

The Government Securities market has to settle a Treasury Bill amounting to Rs. 253.6 bn and a T-Bond interest amounting to Rs. 37.2 bn for the week ending February 3.

Courtesy: First Capital Research (Jan 25)

– Sunday Observer Sri Lanka

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