Sri Lanka gilt markets see activity; heavy trading in 7-year bond

COLOMBO (EconomyNext) – Sri Lanka’s frozen gilt markets gained direction from Tuesday’s Treasuries auction to start trading again, with 7-year bonds being heavily traded, dealers said.

At the Treasuries auction, yields went up between 86 to 91 basis points, lower than expected by some market participants after a rise of nearly 200 basis points at a 30-year auction Friday and the removal of a 5.0 floor policy rate window that saw overnight rates stabilizing around 6.50 percent.

The was heavy trading in a 7-year bond maturing in 2022 with a primary dealer who sold bonds forward last week being a key buyer, market participants sad.

The price of the 7-year bond was driven down from around 8.80 percent to 8.00/8.05 percent levels.

The bond was sold forward last week driving the price up from around 7.90 to 8.05 percent levels after the Tuesday monetary policy statement but before the Friday’s effective monetary tightening and the 30-year bond auction.

Quotes on other maturities also narrowed with less uncertainty following the Treasuries auction.

A 2-year bond was quoted around 7.40/70 percent, up from early last week’s 7.00/05 percent levels, dealers said.

A 3-year bond was quoted around 7.55/80 levels after the yield moved as high as 8.10 percent. The bond was quoted around 7.20/25 percent.

Four and 5-year quotes were not available.