The sentiment in the bond market turned negative during the trading week ending August 13, 2021 as yields were seen heading north on the short end of the yield curve and on the back of thin volumes.
The increase in yields was led by the three year duration as it moved above 7.00% for the first time since June 2020. The 01.12.2024 maturity was traded from a weekly low of 6.88% to a high of 7.10% and in comparison to its previous weeks closing of 6.87/90. In addition, Selling interest on the maturities of 15.12.22, 15.11.23 and 01.10.25 saw its yields hit intraweek highs of 5.73%, 6.38% and 7.28% respectively as well against its previous weeks closing levels of 5.65/70, 6.27/32 and 7.27/27, reflecting an upward shift on the short end of the curve.
The continued increase in the stipulate cut off rate of the 364 day bill maturity, decrease in money market liquidity along with the prevailing uncertainty in the market since the bond auctions conducted on the 29th of July are seen as the reasons behind the negative sentiment. This is despite the subscription level at the weekly Treasury bill auction increasing to 93.17% of its total offered amount.
The daily secondary market Treasury bond/bill transacted volumes for the first four trading days of the week averaged Rs.7.34 billion.
In money markets, the total outstanding liquidity surplus decreased to Rs.15.49 billion by the end of the week from its previous weeks Rs.48.32 billion. Nevertheless, the weighted average rates on overnight call money and repos decreased marginally to average 5.03% and 5.07% respectively for the week against its previous weeks of 5.08% and 5.13%.
(References: Central Bank of Sri Lanka, Bloomberg E-Bond trading platform, Money broking companies)
Courtesy: Wealth Trust Securities Ltd