The secondary market commenced the week on a muted note, with trading volumes subdued as investors exercised caution in the face of political uncertainty leading up to the Presidential election.
However, as the week unfolded and clarity emerged following the election, the market experienced a noticeable resurgence in activity. Investor confidence was restored, fueling strong upward momentum as a more bullish sentiment took hold. This optimism was further supported by an agreement reached with the Ad Hoc bondholder group, which ignited increased buying interest.
Anticipating a future decline in market rates, investors adopted a more assertive approach, driving a significant uptick in secondary market transactions. Consequently, the yield curve saw a sharp decline across mid-to-long tenors, with yields dropping by more than 100bps, while short-tenor rates also fell by 28-55bps compared to the previous week. In particular, highly liquid bonds maturing in 2026 and 2027 attracted notable trading activity.
Meanwhile, CBSL conducted its final bill auction for the month, fully accepting the offered Rs. 120.0Bn. The auction saw a high acceptance rate of 99.6% for the 03M and 06M maturities, while the 1Yr bill was undersubscribed closing at Rs. 463.0Mn. The weighted average yield rates at the primary T-Bill auction saw slight declines after a month, with reductions of 4bps for the 06M bill (10.72%) and 02bps for the 1Yr bill (10.05%). However, the 03M bill’s weighted average yield remained stable at 10.49%. Meanwhile, there was a notable and sharp decline in the cut-off rates of 03M and 06M bills.
In the forex market, the Rs. depreciated against the greenback, recording at Rs. 303.91 on the 25th of Sep 2024, compared to Rs. 301.20 at the beginning of the week.
Courtesy: First Capital Research (Sept 26, 2024)
