Weekly yield movement and volume

The yield curve shifted downwards across the board in anticipation of a possible policy easing at the monetary policy announcement on 8 April 2019. Contrary to expectations, policy rates remained unchanged, resulting in the yield curve shifting upwards amidst both local and foreign selling.
At the T-Bill auction, the one-year was accepted at a weighted average of 9.99 per cent, recording at a single digit for the first time in over six-months. The three-month and six-month were accepted at a weighted average of 9.09 per cent and 9.29 per cent respectively. With the outcome of the Treasury bill auction, selling pressure in the market reversed amidst high volumes. In the forex market, the USD/LKR was seen broadly stable at Rs 174.63/83 and closed for the week at 174.64.

Liquidity & CBSL Holdings

CBSL market liquidity for the week was seen fluctuating continuously, while market liquidity turned positive on 03 April 2019, after a lapse of nearly six months. Thereafter, a liquidity deficit was witnessed. The widest liquidity deficit recorded for the week was on 09 April 2019 at Rs 21.1 billion. CBSL holdings fell to Rs 164.5 billion mid-week from Rs 167.6 billion, and thereafter remained broadly unchanged at former levels.

Foreign Interest

Foreign holding decreased by Rs 1.9 billion to record at Rs 166.1 billion. However, foreign holding percentage remained stable at 3.1 per cent.

Maturities for Next Week

The Government Security Market has a Treasury bill maturity amounting to Rs 24.3 billion that needs to be settled on the week ending 19 April 2019; however, due to it being a holiday, it will be settled on 18 April. Rs 7.5 billion of bond interest needs to be settled on 12 April.

Daily Summary

Thursday (04.04.19): The yield curve continued its downward shift across all maturities in early session of the day, with continued buying interest witnessed from market participants amidst the positive sentiment.

Reflecting the active sentiment, total transacted volumes amounted to Rs 18.0 billion, recording the highest for the week. In line with the buying interest following maturities were seen trading at their intra-day’s low, with [01.08.21] and [15.12.21] at 10.28 per cent and 10.30 per cent, in mid tenor maturities [15.03.22], [15.03.24], [01.08.26] and [15.01.27] at 10.45 per cent, 10.78 per cent, 10.90 per cent and 11.00 per cent, respectively. In the long end of the curve [01.05.29] was seen trading at intraday low of 11.19 per cent. However, towards the later part of the day, with profit taking, yields witnessed a slight upward movement to close at following levels: 2023 maturities at 10.80 per cent-10.70 per cent levels, [15.03.24] at 10.90 per cent-10.85 per cent levels and [15.01.27] at 11.10 per cent-11.05 per cent levels.

Friday (05.04.19): On the back of continued bullish sentiment, the secondary market yield curve closed the week with a parallel downward shift ahead of Monday’s monetary policy announcement. Buying interest was witnessed across all maturities with local buying, which saw [15.12.20] reaching day’s lowest of 10.12 per cent, three 2021 maturities ([01.03.21], [01.08.21] and [15.12.21]) trading at intraday lows of 10.22 per cent, 10.30 per cent and 10.31 per cent, while mid tenure [15.03.22], [15.07.23], [15.03.24] and [01.06.26] traded at day’s low of 10.48 per cent, 10.70 per cent, 10.75 per cent and 11.00 per cent respectively. Buying interest from foreign counterparties was centered on [15.01.27] and [01.05.29] at day’s lowest of 10.95 per cent and 11.17 per cent, while the overall market witnessed high volumes.

Monday (08.04.19): With continued positive sentiment, the secondary market yield curve witnessed buying interest primarily centered on short tenure maturities with [01.05.20] trading at 10.00 per cent, [01.03.21] at 10.22 per cent, [01.08.21] at 10.29 per cent and [15.12.21] changing hands at 10.30 per cent. During the latter session of trading, selling interest was witnessed on [15.01.27] at 11.05 per cent and [15.01.29] at 11.20 per cent, while overall market witnessed thin volumes. At the monetary policy review held today, it was decided to maintain policy interest rates at their current levels, with SDFR at 8.00 per cent and SLFR at 9.00 per cent. Following the CBSL monetary policy announcement of continuation of policy rates, the belly and the long end of the yield curve shifted slightly upwards.

Tuesday (09.04.19): The secondary market yield curve shifted upwards across the board with high volumes, following the outcome of the monetary policy review. On the back of foreign selling witnessed on the 2021 maturities, [01.03.21] traded at day’s high of 10.40 per cent and [01.05.21] at day’s high of 10.50 per cent. Mixed activities were seen on the following: [15.12.21] trading at 10.42-10.47 per cent levels, [15.03.22] at 10.64-10.60 per cent, [15.03.23] and [15.05.23] at 10.90-10.75 per cent and [15.03.24] at 10.95 per cent. Selling was primarily centered on [15.01.27] at 11.20 per cent while activity was also witnessed on [01.05.29] at 11.30 per cent.

Wednesday (10.04.19): The secondary market yield curve shifted downwards across the board following the bill auction outcome, reversing the selling pressure witnessed previously amidst high volumes. Buying interest was primarily centered on the following maturities trading at its intraday lows, [01.03.21] at 10.20 per cent, [01.05.21] at 10.25 per cent, [01.08.21] at 10.30 per cent, [15.12.21] at 10.25 per cent, [15.03.22] at 10.50 per cent, [15.03.24] at 10.90 per cent, [01.06.26] at 11.05 per cent and [01.05.29] at 11.26 per cent.

At the primary bill auction, the three-month and six-month were accepted at a weighted average of 9.09 per cent and 9.29 per cent respectively. The one-year was accepted at a weighted average of 9.99 per cent, recording at a single digit, which is after a six-month period, recorded last on 28 September 2018 at 9.51 per cent.