By First Capital Research
Weekly Yield movement & Volume
The bond market followed the positive momentum continued from last week, while a slight downward shift was witnessed in the secondary market yield curve amidst the buying interest stemming from both local and foreign counterparties. Meanwhile, the USD/LKR remained almost stable during the week at 182.30 levels, although the Government announced a debt repayment of US$ 5.9 billion due this year, including US$ 2.6 billion in the first three months, which is expected to be paid from borrowing plans in the pipeline. Meanwhile, the Central Bank announced issuance of Sri Lanka Development Bonds (SLDB) up to US$ 200 million and issued a request for proposals from investment banks to sell international sovereign bonds in US$, Yen, Renminbi and Euro to strengthen the reserves. At the primary bill auction held on 23 Wednesday, both the six-month and one-year were accepted at weighted averages of 9.87 per cent and 10.70 per cent respectively, while one-year yields dipped by 5bps and six-month remained at the same level.
Liquidity & CBSL Holdings
CBSL market liquidity remained negative throughout the week recording the lowest liquidity for the week was recorded on 18 January, amounting to Rs 139.3 billion. CBSL holdings increased towards the latter part of the week and closed at Rs 177.6 billion.
Foreign holding was recorded at Rs 145.4 billion, recording a drop of Rs 8.7 billion continuing the foreign selling since August 2018. Foreign holding percentage for the week declined to 2.8 per cent relative to 3.0 per cent in the previous week.
Maturities for next Week
The Government Securities Market has a Treasury bill maturity amounting to Rs 15.5 billion and an SLDB maturity amounting to US$ 196.4 million for the week ending 1 February. There is also a bond coupon payment of Rs 29.1 billion falling due within the week.
Thursday (17.01.19): Overall market yield curve continued on the downward shift, as the positive momentum in the secondary bond market continues with moderate volumes. Amidst the buying interest emanating from both local and foreign counter parties across the yield curve,
[01.05.20] reached day’s lowest of 10.75 per cent, [01.03.21] at 10.80 per cent, [15.05.23] at 11.25 per cent, [15.07.23] at 11.23 per cent, [15.12.23] at 11.20 per cent, [01.08.24] at 11.35 per cent, [15.03.25] at 11.35 per cent and [01.09.28] at 11.45 per cent, while foreign buying was witnessed on [15.12.21] at 10.88 per cent and [01.08.26] at 11.40 per cent.
Friday (18.01.19): The secondary market yield curve continued on the downward shift as the positive momentum arising from last week’s primary bond auction continues, while the overall market witnessing moderate volumes. Buying interest stemmed from foreign counterparties
predominantly centered on [15.12.21] at 10.80-10.76 per cent levels, while on the back of foreign buying mid tenure maturities reached intraday lowest with [15.05.23] trading at 11.23 per cent, [01.09.23] at 11.18 per cent, [15.12.23] at 11.17 per cent, and [01.08.26] at 11.34 per cent and [15.06.27] at 11.45 per cent. The rupee appreciated to close the week at 181.55/65.
Monday (21.01.19): On the back of profit taking, the secondary market yield curve moved slightly upwards on the mid tenor maturities, reversing the downward sentiment prevailing during last week. Following maturities were seen trading at intraday high with [15.12.21] trading at 10.84 per cent, [15.07.23] and [15.12.23] at 11.27 per cent, [15.03.25] at 11.41 per cent, [01.06.26] at 11.47 per cent and [01.08.26] at 11.44 per cent, while the overall market witnessed thin volumes. CBSL announced the issuance of a US$ 2.0 billion sovereign bond with fixed coupon and medium to long term maturities.
Tuesday (22.01.19): On the back of profit taking, belly and long end of the yield curve shifted slightly upwards ahead of primary bill auction. Profit taking was predominantly centered on two 2023 maturities ([15.07.23] and [15.12.23]) at 11.30 per cent while mid to long tenure maturities reached intraday high with [01.03.21] trading at 10.72 per cent, [15.12.21] at 10.84 per cent, [01.08.24] at 11.38 per cent, [15.03.25] at 11.46 per cent, [01.06.26] at 11.48 per cent, [01.08.26] at 11.50 per cent, [15.06.27] at 11.49 per cent and [01.09.28] at 11.53 per cent, while the overall market witnessed moderate volumes. Foreign buying was witnessed on [01.03.21] at 10.70 per cent, while foreigners were selling [01.08.26] at 11.45-50 per cent levels.
Wednesday (23.01.19): The overall yield curve recorded a parallel shift downwards to fall in line with the primary bill auction outcome. At the primary bill auction, yield one-year bill dipped by 5bps to be accepted at a weighted average of 10.70 per cent, while six-month bill yield remained unchanged at 9.87 per cent. On the back of renewed foreign buying interest predominantly centered on short tenure maturities, [01.05.20] changed hands at 10.63 per cent and [01.03.21] at 10.70 per cent, while the following maturities reached day’s lowest with [15.10.21] trading at 10.83 per cent, [15.12.21] at 10.78 per cent, three 2023 maturities ([15.05.23], [15.07.23] and [15.12.23]) at 11.25 per cent, 11.28 per cent and 11.24 per cent, [15.03.25] at 11.42 per cent, [01.06.26] at 11.45 per cent, [01.08.26] at 11.42 per cent, [15.06.27] at 11.45 per cent and [01.09.28] at 11.46 per cent, while the overall market witnessed moderate volumes.