Parallel upward shift of yield curve for first time in three weeks

• Activity in secondary bond market moderates
• Foreign selling continues

By Wealth Trust Securities

Overall activity in the secondary bond market moderated during the week ending 14 December with most market participants opting to be on the sidelines, despite the successful conclusion of the final bond auction for the year, where the weighted average yields and volumes were impressive.

The yields of the liquid maturities of 15.12.21 and 01.08.26 were seen increasing during the week to hit highs of 11.85% and 12.10% respectively against its previous weeks closing levels of 11.50/60 and 11.80/90. Furthermore, two way quotes along the rest of the yield curve too increased, resulting in a parallel shift upwards of the overall yield curve, with foreign selling of rupee bonds for the week ending 12 December recording an outflow of Rs. 4.83 billion.

The weighted average yields at the weekly Treasury bill auction increased by 02 and 04 basis points respectively on the 182 day and 364 day maturities.

The daily secondary market Treasury bond/bill transacted volumes for the first four days of the week averaged Rs. 5.22 billion. 

In money markets, the average net liquidity shortfall in the system stood at a Rs. 82.12 billion, with the OMO (Open Market Operation) Department of the Central Bank injecting liquidity throughout the week on an overnight and seven day basis at weighted averages ranging from 8.64% to 8.82% and 8.68% to 8.82%. The overnight call money and repo rates averaged 8.93% and 9.00% respectively. In addition, liquidity was also infused by way of auctions for the outright purchase of Treasury bills, where an amount of Rs. 2.15 billion was injected in total at weighted average yields ranging from 10.00% to 10.10% for periods ranging from 158 days to 186 days.

Rupee loses again 

The dollar rupee rate on spot contracts closed the week lower again at Rs. 179.90/10 against its previous weeks closing of Rs. 178.60/90 on the back of buying interest.

The daily USD/LKR average traded volume for the first four days of the week stood at $ 89.08 million.

Some of the forward dollar rates that prevailed in the market were one month – 180.90/30; three months – 182.90/30 and six months – 185.90/40.