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Treasury Bills and Bonds in Sri Lanka

Weekly Govt Securities Market Positive liquidity sets 1-Year bill to hit nearly 16-month low

CEYLON TODAY | 24.05.2019

Treasury Bills and Bonds Sri Lanka

By First Capital Research

Weekly yield movement and volume

The secondary market yield curve continued its downtrend on the back of heavy buying interest, primarily centred on the short to mid tenor maturities. Shorter end of the curve witnessed a decline in the range of 0-40bps while the belly-end witnessed a steep decline in the range of 45-59bps. Long tenors saw a dip in yields by nearly 30bps. The total secondary market turnover for the week from 16 May to 22 May amounted to Rs 54.4 billion. At the primary bill auction held on 22 May, the one-year bill yield was seen plunging below 9 per cent to reach 8.90 per cent levels after nearly 16 months with a steep drop of 28 basis points, followed by the six-month bill dipping by 17 basis points to 8.71 per cent. However, all bids received on the three-month bill were rejected with the total offered amount of Rs 20.0 billion being fully accepted.
Meanwhile, at the SLDB auction, out of the total offered amount of US$ 200 million, US$ 165.5 million was accepted with maturities ranging from one-year and eight-months to three-year and 11-months. In the forex market, the rupee appreciated slightly on 17 May to Rs 175.85 relative to Rs 176.04 on 16 May; thereafter, it slightly depreciated to close the week at Rs 176.59.

Liquidity and CBSL Holdings

Market liquidity remained positive throughout the week to close the week at Rs 19.75 billion, while CBSL continued to drain out liquidity by way of repo auctions during the week. CBSL holdings slightly declined to Rs 158.54 relative to Rs 160.28 held at the beginning of the week.

Foreign Interest

Foreign holding further decreased by Rs 433.1 million to record at Rs 143.3 billion. Foreign holding percentage dipped to 2.6 per cent from previous 2.7 per cent.

Maturities for next Week

The Government security market has a Treasury bill maturity amounting to Rs 14.4 billion and a coupon of Rs 23.1 billion that needs to be settled during the week ending 31 May 2019.

Daily Summary

Thursday (16.05.19): Buying interest witnessed in the secondary market led to a slight downward shift in the overall yield curve. while the market witnessed moderate volumes. Foreign buying centred on [15.03.24] at 10.41 per cent and on [01.09.28] at 10.71 per cent, while activity was witnessed on two mid tenure 2023 maturities ([15.03.23] and [15.07.23]) at intraday lows of 10.30 per cent and 10.32 per cent, while two 2027 maturities ([15.01.27] and [15.06.27]) traded at 10.68 per cent and 10.76 per cent respectively. Foreign selling was witnessed on short tenure [01.10.22] at 10.15 per cent.
Friday (17.05.19): The secondary market yield curve witnessed a slight downward shift fuelled by the continued buying interest, while the overall market witnessed high volumes. In the midst of buying interest, following maturities’ yields were seen decreasing to their intra-day lows, with short tenor [01.03.21] at 9.57 per cent, [01.05.21] at 9.65 per cent, [01.08.21] at 9.60 per cent and [15.12.21] at 9.68 per cent. Mid tenors [15.03.22], [15.03.23] and [15.07.23] changed hands at intra-day lows of 9.88 per cent, 10.25 per cent and 10.23 per cent, while both foreign and local buying were centered on [15.03.24] maturity, which traded at day’s low of 10.27 per cent. Moreover, [01.08.24] was seen trading at intraday low of 10.31 per cent, while both [01.08.26] and [15.01.27] traded at 10.60 per cent. In the long end of the curve, [01.05.29] traded at 10.80 per cent. In the money market, overnight surplus liquidity in the system stood at Rs 38.2 billion, while CBSL continued to absorb excess liquidity of another Rs 57.8 billion by way of term repo auctions.
Tuesday (21.05.19): The secondary market saw aggressive buying interest in the morning session, following the CBSL Governor’s indication of a likely monetary loosening at the next policy meeting. Short-tenure maturities reached intraday low on the back of buying interest with [15.03.22] trading at 9.90 per cent, [15.05.23] at 10.10 per cent, [15.03.24] at 10.05 per cent, [01.08.26] at 10.30 per cent and [15.01.27] at 10.36 per cent.

Ahead of primary bill auction, the one-year traded at 9.03 per cent, while the overall yield curve continued to shift down amidst buying interest, while the overall market witnessed moderate volumes. Profit taking was witnessed on [15.03.24] and [15.01.27] at 10.15 per cent and 10.50 per cent respectively. CBSL has offered Rs 20 billion consisting of all three maturities at auction.