Government Securities Market (Week ended March 3, 2023)

12 March, 2023

The Central Bank of Sri Lanka resumed its monitory tightening stance by raising its policy rates for the first time in 2023 at its second review meeting announced on Friday, March 3. An increase of 100 basis points saw the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) advance to 15.50% and 16.50%.

The increase in demand at the weekly Treasury Bill auction, increase in money market liquidity, sharp appreciation of the rupee, continued demand for Rupee bills by foreign investors coupled with developments on the IMF front with regard to its Extended Fund Facility (EFF) to Sri Lanka reflected positively on the trading sentiment in the secondary market during the week ending March 3, 2023 leading to a steep decrease in bond yields, prior to the monetary policy announcement released late on Friday.

At the weekly Treasury Bill auction, the total offered amount – Rs. 85 billion was fully subscribed at its 1st phase of the auction for the first time in three weeks while a further Rs. 21.25 billion was taken at its second phase .

The offered amount – Rs. 20 billion on the 4.5 year, 15.09.2027 maturity was fully accepted at its first phase of the T-bond auction at a weighted average rate of 29.37% while a further amount of Rs. 4 billion was taken at its direct issuance Window. However, all bids received for the Rs. 15 billion, 2-year maturity of 15.01.2025 were rejected.

In money markets, the total outstanding liquidity deficit was seen decreasing further to a low of Rs.14.10 billion at the end of the week against its previous week’s deficit of Rs.53.94 billion.

Meanwhile, the Colombo Consumer Price Index -CCPI (Base;2021=100) or inflation for the month of February came in at 50.6% on its point to point as against 51.7% recorded in January.

In the secondary bond market, the yields of the liquid maturities of 15.05.26 and two 2027’s (i.e., 01.05.27 &15.09.27) were seen decreasing to weekly lows of 28.60% and 27.70% respectively against its previous weeks closing levels of 29.50/80 and 29.10/40. In addition, 2025(i.e., 15.01.25 and 01.07.25)and 15.01.28 maturities dipped to weekly lows of 31.75%, 31.70% and 27.00% as well. However, the two-way quoted were seen increasing and widening following the monetary policy announcement. .

(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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