Yield curve holds steady in pre-policy calm

By First Capital Research

Yesterday, the activity in the secondary market appeared somewhat dormant, as the market participants embraced a cautious approach ahead of the Central Bank’s third monetary policy decision set to be announced today. 

Consequently, the yield curve appeared largely unchanged amid the market’s wait and see approach. 

Among the few trades that took place, the 01.05.2028 maturity traded at 9.75 percent while further ahead on the yield curve, the 15.03.2031 maturity traded at 10.75 percent. Finally, the 01.11.2033 maturity was seen changing hands at the rate of 10.97 percent. 

The Central Bank held its weekly T-bill auction yesterday, fully raising the offered Rs.157.5 billion. The three-month T-bill weighted average yield remained unchanged at 7.65 percent, with Rs.13.0 billion raised versus an offer of Rs.20.0 billion. Weighted average yields on the six-month and 12-month maturities edged down 1bps to 7.97 percent and 8.29 percent, respectively. The six-month T-bill raised Rs.50.0 billion, matching its offer, while Rs.94.5 billion was accepted for the 12-month bill, exceeding its Rs.87.5 billion target.

In the forex market, the Sri Lankan rupee depreciated against the greenback, closing at Rs. 300.6/US dollar, compared to the previously seen rate of Rs.299.5/US dollar. Meanwhile, overnight liquidity in the banking system contracted to Rs.163.2 billion, from Rs.174.1 billion in the previous session.