Buying interest persists as rates experience continued declines

By First Capital Research
At the T-bill auction held yesterday, the Central Bank fully accepted the bills offered totalling Rs.142.5 billion.
The Central Bank oversubscribed the three-month T-bill and fully subscribed the six-month T- bill. However, the one-year T-bill was undersubscribed. The weighted average yield rates saw a decline, where the three-month bill saw a decline of 43 basis points (bps) at 10.06 percent. The six-month bill also saw a decline of 35bps at a rate of 10.37 percent.
The one-year bill saw a slight decline of one bps at 10.04 percent. Meanwhile, the secondary market yield curve saw increased buying interest and moderate trading volumes, as rates declined across the curve amidst yesterday’s T-bill auction. Prior to the auction, on the short end of the curve, 15.12.27 traded at a rate of 11.40 percent. On the belly end of the curve, 15.02.28, 01.05.28, 01.07.28 and 15.12.28 traded at rates of 11.60 percent, 11.60 percent, 11.65 percent, and 11.70 percent, respectively.
Additionally, 15.06.29 and 15.09.29 traded at a rate of 11.95 percent. 15.10.30 and 01.12.31 were seen trading at rates of 12.22 percent and 12.25 percent, respectively. Market yields rates experienced a further decline following the results of the T-bill auction, where post auction 15.12.27 traded at a rate of 11.25 percent. Similarly, 15.02.28 and 15.03.28 traded at rates of 11.45 percent and 11.50 percent, respectively. 15.06.29 and 15.09.29 also experienced declines, trading at rates of 11.70 percent and 11.85 percent, respectively. On the external front, the Sri Lankan rupee appreciated against the US dollar, closing at Rs.295.62/US dollar, compared to Rs.297.20/US dollar recorded the previous day. The Central Bank holdings of government securities remained unchanged, closing at Rs.2,515.62 billion today. Overnight liquidity in the banking system expanded to Rs.90.96 billion from Rs.7.57 billion recorded the previous day.