In an action-packed short week, secondary market yield curve budged down significantly following the DDO announcement, attracting sizeable buying interest. Moreover, weekly auction yields too displayed a heavy downswing of 300-500bps.
Furthermore, at the monetary policy review meeting held on 05th July-23, CBSL decided to reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 200bps to 11.00% and 12.00%, respectively.
As the week opened, sluggish momentum continued to prevail ahead of the DDO announcement. However, following the DDR clarification, fresh buying appetite emerged in the secondary market broadly across all maturities with significant interest on 2025, 2026, 2027 and 2032 tenors while volumes substantially improved. Accordingly, two-way quotes on the secondary market was seen declining by over 700bps.
Meanwhile at the weekly treasury bill auction, total offered amount of LKR 140.0Bn was fully accepted by CBSL whilst the weighted average yield rates edged down after a week as 3M, 6M and 1Yr bills fell to 17.79% (-521bps), 15.93% (-356bps) and 13.86% (-313bps).
In the Forex market, LKR slightly appreciated against the greenback with rupee being recorded at LKR 306.3 compared to LKR 308.8 recorded during the beginning of the week.
Courtesy: First Capital Research (July 5, 2023)