Positive sentiment in the bond market is accelerating


  • Parallel downward shift on the yield curve
  • Foreign release for the first time in nine weeks
  • Rupee drops slightly

By Wealth Trust Securities

Secondary bond market yields declined significantly during the week ending July 22, 2022, continuing the bearish momentum seen during the latter part of the previous week. Rising demand at the weekly treasury bill auction, which saw weighted average rates fall across the board for the first time in five weeks, coupled with improving investor sentiment, were seen as the reasons that led to the downward momentum.

Yields for liquid maturities on 01.06.25 and 15.07.29 declined to weekly lows of 24.82% and 24.50%, respectively, from previous weeks’ closing levels of 27.00/75 and 27.75/25. In addition, 15.06.27 and 15.01.28 maturities also traded at lows of 24.97% and 24.50% respectively, while two-way quotes on the rest of the curve declined to reflect a move down. bottom of the overall yield curve while continuing. stay inverted.

In the secondary bond market, the October 2022 and July 2023 maturities traded at lows of 28.00% and 28.50% respectively against post-auction highs of 31.00% and 29.50% .

Foreign holdings of rupee bonds fell by 0.61 billion in the week ending July 20, reversing an increase seen in the previous eight weeks, while the National Consumer Price Index (NCPI ; base 2013 = 100) for the month of June peaked at 58.9% on its point-to-point basis against the previous month’s figure of 45.3%.

Daily secondary market bond/treasury bill volumes traded for the first four trading days of the week averaged Rs. 14.03 billion.

In the money markets, the total outstanding liquidity deficit was recorded at Rs. 591.75 billion by the end of the week against its previous weeks of Rs. Govt. Security stood at Rs. 2,267.25 billion against its previous weeks of Rs. 2,269.33 billion. Overnight and repo weighted average rates were 15.50% each for the week.

Change market

In the Forex market, the average USD/LKR spot contract rate closed the week at Rs. 361.30 compared to its previous weeks close of Rs. 361.24.

The average daily USD/LKR trading volume for the first four trading days of the week stood at $80.01 million.

(References: Central Bank of Sri Lanka, Bloomberg E-Bond trading platform, money brokerage firms)


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