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Treasury Bills and bonds in Sri Lanka

One-year bill yield dips to near 3½-year low

CEYLON TODAY | 05.07.2019

Share Market Investment in Sri Lanka

By First Capital Research
Weekly Yield movement & Volume

During the week, the secondary market traded on a bullish note, with renewed buying interest, shifting the yield curve downwards primarily on the long end. Successful issuance of the US$ 2.0 billion International Sovereign Bond and anticipated improvement in foreign reserves propelled the buying interest in the market.
Moreover, at the weekly primary bill auction held on 3 July, yields of the three-month, six-month and one-year recorded declines by 7, 17 and 11bps to 8.17 per cent, 8.32 per cent and 8.59 per cent, with the one-year declining to a near 3½-year low. Meanwhile, in the forex market, the rupee continued to appreciate during the week, while closing at Rs 176.06 on 3 July, relative to Rs 176.42 held at the beginning of the week.

Liquidity & CBSL Holdings

Market liquidity remained positive throughout the week to close at Rs 12.1 billion, while CBSL continued to drain out liquidity by way of term repo auctions during the week. CBSL holdings slightly declined to Rs 123.9 billion relative to Rs 128.1 billion held at the beginning of the week.

Foreign Interest

Foreign holding in Government Securities increased by Rs 2.2 billion to record at Rs 146.1 billion. Foreign holding percentage for the week was increased to 2.7 per cent.

Maturities for next Week

The Government Security Market has to settle a Treasury bill maturity amounting to Rs 22.2 billion during the week ending 12 July 2019.

Daily summary

Thursday (27.6.19): The secondary market yield curve remained broadly unchanged, while the overall market witnessed moderate volumes. On the Treasury bond auction held today, the total offered amount of Rs 125 billion was fully accepted with [15. 6.24] and [15.3.35] accepted at weighted averages of 9.83 per cent and 10.59 per cent, respectively. Post auction profit taking was seen with moderate volumes with [15.3.24] trading at 9.85-9.95 per cent levels. The newly accepted bond [15.6.24] traded at 9.9 per cent after being accepted at a notable weighted average of 9.83 per cent. Business was done on the following maturities with [15.10.21] trading at 9.25-9.30 per cent levels, [15.03.24] at 9.95 per cent, [15.06.24] at 9.95 per cent, [15.01.27] at 10.20 per cent, [15.06.27] at 10.40 per cent, [01.05.29] at 10.35 per cent and [15.05.30] at 10.45 per cent.

Friday (28.6.19): The secondary market witnessed mixed levels of activities during the day while overall market recorded high volumes. During the early part of the day, in the midst of selling interest, [15.3.24] and [15.6.24] reached intra-day highs of 10.02 per cent and 10 per cent, although towards the latter half of the day, with buying interest, saw its yields dipping to intra-day lows of 9.90 per cent and 9.88 per cent. Moreover, buying interest was observed in [01.3.21], [1.5.21], [1.8.21] and [15.10.21], with business done at 9.10 per cent, 9.20 per cent, 9.25 per cent and 9.30 per cent. Foreign buying interest on [1.6.26], [15.1.27] and [15.6.27] led the yields to trade at 10.15 per cent, 10.17 per cent and 10.26 per cent levels.

Monday (1.7.19): With the commencement of the week, the secondary market witnessed continued buying interest, although overall market witnessed thin volumes with limited activities. During the day, shorter tenor [15.10.21] traded at 9.25 per cent levels, while in the belly end of the curve, the [15.6.24] maturity traded in the range of 9.88-9.83 per cent levels.

Tuesday (2.7.19): Secondary market witnessed slowdown in overall activity levels while the belly- and long-end of the yield curve experienced slight parallel downward shifts with low volumes. Buying interest was witnessed on short tenure [1.3.21] at 9.12 per cent ahead of the primary bill auction, where CBSL has offered Rs 23 billion consisting of all three maturities. Buying interest saw long tenure [01.5.29] trading at 10.35 per cent, while mid-tenure 2024 maturities ([15.3.24] and [15.6.24]) changed hands at 9.88 per cent.