Policy rates kept unchanged

Thursday, 27 March 2025 03:11 - - {{hitsCtrl.values.hits}}

T-bill rates unchanged; auction undersubscribed
Secondary bond market yields close steady
Rupee depreciates

By Wealth Trust Securities

At the 2nd Monetary Policy Review for 2025, the Central Bank of Sri Lanka (CBSL) yesterday announced that it had decided to hold all key rates unchanged. This marks the second consecutive review where all key rates were held unchanged. Accordingly, the monetary policy rate, the Overnight Policy Rate (OPR) was maintained at the current level of 8.00%. In addition, the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR), which are linked to OPR with pre-determined margins of ± 50 basis points, remain unchanged at 7.50% and 8.50%, respectively. The statutory reserve rate also remained at 2.00%.

The official press release stated that: “The Board arrived at this decision after carefully considering the developments both domestically and globally. The Board remains confident that the prevailing monetary policy stance will ensure that inflation will move towards the target of 5% while supporting the growth of the domestic economy.”

Meanwhile, the weighted average rates at yesterday’s Treasury bill auction remained steady for the first time after 19 weeks where yields on at least one tenor were seen decreasing. Hence, the weighted average rates were recorded at the rate of 7.50% on the 91-day tenor, the 182-day tenor at 7.84% and the 364-day tenor at 8.25%.

The auction went undersubscribed with only 73.01% or Rs. 73.38 billion of the total Rs. 100.50 billion amount offered. This was despite total bids received exceeding the offered amount by 1.81 times. The 2nd phase of subscription for the auction will be opened for all three maturities at the weighted average rates until close of business of the day prior to settlement (i.e., 3 p.m. today). In the secondary bond market, rates were seen edging up on a knee-jerk reaction to the monetary policy announcement before renewed buying interest kicked in and as a result rates closed broadly steady. Market activity and transaction volumes were seen at healthy levels.

Accordingly, the 01.05.28 maturity was seen trading at the rate of 9.85%. The 01.07.28 and 15.10.28 maturities were seen trading within the ranges of 9.88%-10.00% and 9.97%-10.02%. The 15.09.29 and 15.12.29 maturities were seen trading at the rates of 10.20%-10.25% and 10.30%. The 15.10.30 maturity was seen changing hands within the range of 10.30%-10.40%. The 15.12.32 maturity was seen trading at the rate 10.70%-10.75%.

The total secondary market Treasury bond/bill transacted volume for 25 March 2025 was Rs. 25.50 billion.

In money markets, the weighted average rates on overnight call money and Repo stood at 7.95% and 7.98% respectively.

The net liquidity surplus stood at Rs. 166.96 billion yesterday. Rs. 0.46 billion was withdrawn from the Central Banks SLFR (Standing Lending Facility Rate) of 8.50%, while an amount of Rs. 167.42 billion was deposited at Central Banks SDFR (Standard Deposit Facility Rate) of 7.50%.

Forex market

In the Forex market, the USD/LKR rate on spot contracts closed the day depreciating to Rs. 296.30/296.40 as against its previous day’s closing level of Rs. 296.55/296.65.

The total USD/LKR traded volume for 25 March was $ 62.15 million.

(References: Central Bank of Sri Lanka, Bloomberg E-Bond trading platform, Money broking companies)

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