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Treasury Bills and Bonds in Sri Lanka

Positive Liquidity drives downward shift in yield curve

Stock Market Sri Lanka

 

By First Capital Research
Weekly yield movement & volume

The secondary market witnessed continued buying interest mainly centred on short- to mid-tenors, while the overall yield curve was seen recording a parallel shift downwards repeatedly. In the midst of positivity being reinforced into the market from continuous net surplus in liquidity (which hit a one-year high on 07 May at Rs 82.76 billion), renewed buying interest was seen on short-tenure maturities dipping by 25-33bps. Mid-tenure maturities were seen dropping by 13-30bps, while long-tenors witnessed a dip in yields within the range of 12-17bps. At the primary bill auction held on 08 May, the three-month and six-month were accepted at a weighted average of 8.51 per cent and 9.00 per cent, while the benchmark one-year witnessed a decline of 37bps to be accepted at 9.44 per cent. The total offered amount of Rs 22.0 billion on all three maturities was successfully met with the bid-to-offer ratio increasing to five times amidst stronger demand. Meanwhile, in the forex market, despite the LKR witnessing depreciation against the USD during the beginning of the week, towards the end, it appreciated to close at Rs 174.80, compared to
Rs 176.28 recorded on 02 May 2019.


Liquidity & CBSL Holdings

Market liquidity remained positive and further improved as a result of the SRR cut and release of long-delayed payments by the Government to record at Rs 75.2 billion. CBSL holdings for the week marginally declined to Rs 160.3 billion from Rs 160.4 billion levels.


Foreign Interest

Foreign holdings decreased by Rs 3.2 billion to record at Rs 154.5 billion; however, the foreign holding percentage remained unchanged at 2.9 per cent.


Maturities for next Week

The Government Security Market has a Treasury bill maturity amounting to Rs 21.3 billion and a coupon payment of Rs 11.2 billion that needs to be settled on the week ending 17 May 2019.


Daily Summary

Thursday (02.05.19): On the back of continued buying interest, the overall yield curve shifted slightly downwards, while the overall market witnessed high volumes. Short-tenure maturities were trading at intraday lows with [01.05.20] at 9.75 per cent, [15.12.20] at 9.90 per cent, [01.05.21] at 10.05 per cent, [01.08.21] at 10.10 per cent, [15.10.21] at 10.12 per cent and [15.12.21] at 10.15 per cent. Mid-tenor [01.10.22] traded at 10.44 per cent, [15.03.23] at 10.58 per cent and [01.09.23] at 10.70 per cent. Furthermore, in the midst of heavy buying interest, [15.03.24] traded at intra-day low 10.78 per cent, while [01.08.26] traded at 10.90 per cent. In the long end of the curve, [01.05.29] traded at 11.10 per cent.
Friday (03.05.19): The secondary market yield curve witnessed a slight downward shift across all maturities with continued buying interest, while the overall market witnessed high volumes. Activities were seen mainly centred on short- to mid-tenor maturities, while [01.08.21] and [15.12.21] were seen trading at their intra-day lows of 10.07 per cent and 10.10 per cent. Mid-tenor [01.10.22] traded at 10.30 per cent, [15.03.23] at 10.52 per cent and [15.03.24] at 10.72 per cent. In the long end of the curve, [01.05.29] was seen changing hands at 11.07 per cent. Meanwhile, the positive sentiment in the market was further fuelled with continuous surplus witnessed in the liquidity during the week.
Monday (06.05.19): Continued buying interest was seen across the board, while overall market witnessed high volumes. Buying interest on short-tenure maturities was seen trading at their intraday lows with [15.09.19] at 9.00 per cent, while [01.08.21], [15.10.21] and [15.12.21] all traded at 10.00 per cent. Mid-tenure maturities [15.03.22], [01.10.22] traded at intraday lows of 10.12 per cent and 10.20 per cent respectively, while [15.03.23] and [15.12.23] traded at 10.45 per cent and 10.52 per cent respectively. In the long end of the curve, [15.03.24] and [01.08.26] traded with considerable volumes at 10.63 per cent and 10.85 per cent. In addition, [15.01.27], [15.06.27] and [01.05.29] traded at 10.92 per cent, 10.96 per cent and 11.02 per cent respectively.
Tuesday (07.05.19): The secondary market yield remained mostly unchanged, while the overall market witnessed limited activities with low volumes. Ahead of the weekly bill auction, continued buying interest was seen on short-tenures with following maturities were seen trading at their intra-day lows: [15.09.19] at 9.00 per cent, [01.11.19] at 9.10 per cent, [01.03.21] at 9.90 per cent and [15.12.21] at 10.00 per cent. In addition, mid-tenure [15.03.23], [15.12.23], [15.03.24] and [01.08.26] traded at intra=day lows of 10.42 per cent, 10.50 per cent, 10.61 per cent and 10.82 per cent respectively
Wednesday (08.05.19): Continued positive sentiment was witnessed on the back of downward momentum in yields across the board amidst high volumes. The short end of the curve witnessed buying interest at intraday lows with [01.05.21], [01.08.21] and [15.12.21] with business done at 9.80 per cent, 9.80 per cent and 9.98 per cent respectively. Maturities [15.03.22], [15.03.23], [15.07.23], [15.12.23] traded at intraday lows of 10.05 per cent, 10.38 per cent, 10.35 per cent, 10.40 per cent in addition 15.03.24 and 15.01.27 traded at 10.45 per cent and 10.75 per cent. At the primary bill auction, the three-month and six-month were accepted at a weighted average of 8.51 per cent and 9.00 per cent dipping by 38bps and 9bps respectively. The one-year was accepted at a weighted average of 9.44 per cent, dipping by 37bps. All three maturities were accepted at lows last witnessed seven months ago. Post bill auction, profit-taking was witnessed on [15.03.24], with some selling interest at 10.55 per cent and closed at 10.50/60 per cent.