“Notable decline in yields post signing of IMF EFF deal” | Sunday Observer
Weekly Government Securities Market

“Notable decline in yields post signing of IMF EFF deal”

26 March, 2023

The secondary market displayed mixed sentiment during the week with the short tenors plunging by over 100bps on the back of Sri Lanka securing the USD 3.0Bn IMF EFF agreement. Meanwhile, at the primary market, T-Bill auction witnessed active participation with the weighted average yields sinking for the 4th consecutive week by over 100bps across the board.

In the beginning of the week, lackluster sentiment took over the secondary market amidst limited participation as investors remained on the sidelines ahead of the IMF executive meeting. However, post signing the 48-month IMF EFF agreement, buying sentiment remained dominant in the secondary market mainly on 2025 and 2027 maturities which fell up to 75bps. Meanwhile, following the results of the weekly T-Bill auction, 3M maturity fell below 27.0% in the secondary market where other short tenors also dropped by over 100bps.

Continuing the persistent downtrend at weekly bill auction yields, weighted average yields at the primary auction plunged for the fourth consecutive week registering a significant dip across the board amidst a full acceptance. Accordingly, weighted average yield rates of 03M maturity lowered to 26.23% (-171bps), 06M declined to 26.12% (-122bps) while 1Yr budged low to 24.32% (-160bps).

In the Forex market, LKR witnessed a sizeable appreciation against the greenback with rupee being recorded at LKR 321.9 compared to LKR 337.3 recorded during the beginning of the week.

Courtesy: First Capital Research (March 22)