Falling global oil prices triggers Secondary Bond market relief rally

Rs. 130 b T-Bill auction in focus, Rupee appreciates

- BY WEALTH TRUST SECURITIES

A sharp correction in global oil prices triggered a relief rally in Sri Lanka's Secondary Government Bond market yesterday. Brent crude, which had surged to nearly $ 120 per barrel amid fears of supply disruptions in the Middle East, fell below $ 95 after signals emerged that geopolitical tensions may ease. This was spurred by news that the US President indicated that the conflict with Iran could be nearing its end. He also noted plans to waive oil-related sanctions and deploy the US Navy to escort tankers through the Strait of Hormuz, aiming to stabilise oil flows and prevent further price spikes.

The decline in oil prices eased fears of prolonged energy inflation and external sector pressures for oil-importing economies such as Sri Lanka. As a result, risk premiums embedded in Government securities began to compress, attracting renewed buying interest from banks and institutional investors. The rally was observed across the yield curve. Activity and transaction volumes were initially very strong during the rally but eventually tapered off as market participants settled back into a wait and see mode as the day progressed.