The week opened with lacklustre sentiment, amidst less participation as investors chose to be on the sidelines ahead of the monetary policy review meeting, stated First Capital Research in its weekly Government Securities market report.
In the midst of uncertainty hovered around IMF proceedings, slight selling pressure emerged on the 2026 and 2028 maturities. However, as expectations of a policy rate cut grew stronger, the market experienced a surge in bullish optimism, resulting in increased demand for the mentioned maturities which traded at its lowest at 15.00% and 14.15%.
As expected, at the monetary policy review meeting held on 04th Oct 2023, CBSL decided to reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 100bps to 10.0% and 11.0%.
The decline in policy rates is likely to exert further downward pressure on the market interest rates, mainly lending rates, in the upcoming period.
CBSL also conducted its weekly Treasury Bill auction and partly accepted a total of LKR 105.0Bn, with the majority accepted from the 91-day maturity.
With CBSL revising down the cut off rates of the bill auction, weighted average yields slid across the board with 91-day bill recording the sharpest decline of 20 bps to 17.22% whilst the 182-day and 364-day bills also saw weighted average yields declining by 4bps to 15.09% and 14 bps to 13.16%.
In the Forex market, the Rupee slightly appreciated against the USD with the rupee being recorded at Rs. 323.8 compared to Rs. 324.4 recorded during the beginning of the week.
