Secondary bond and bills markets remained active throughout the week

By Wealth Trust Securities

As weighted averages at the Treasury bond auctions dipped more than market expectations in line with the bond maturity which fell due on the 1 February and considerable buying interest by foreign investors, the weighted averages on Treasury bills dipped for an eighth consecutive week as well.

However, the degree of the decline on the 364 day bill average was controlled by the fact of double the amount was accepted on this maturity against its initial offered amount of Rs. 15 b. In secondary bond markets, yields continued to decline during the week amidst inflation increasing for the month of January.

A majority of the activity was once again witnessed on the two liquid five year maturities (i.e. 15 August 2018 and 1 April 2018) from weekly highs of 11% and 11.05% respectively at the beginning of the week to lows of 10.75% and 10.80% towards the latter part of the week.  Furthermore, buying interest on secondary market bills continued during the week, mainly on the 364 day bill as it traded at a low of 10.90% pre auction, and at levels of 11.05% to 11.10% post auction.

Liquidity increases above Rs. 47 b once again

Meanwhile in money markets, liquidity increased once again by end of the week to Rs. 47.2 b following the 1 February bond maturity of Rs. 77 b. The Central Bank continued to mop up liquidity on a daily basis by way of repo auctions conducted by its Open Market Operation (OMO) department, which in turn helped keep overnight call money and repo rates steady to average 9.63% and 8.81% respectively during the week.

Rupee appreciates during the week

Dollar inflows into rupee bonds coupled with selling on forward dollar contracts saw the rupee appreciate during the week to close the week at Rs. 126.35/45 in comparison to its previous weeks closing level of Rs. 127.10.  The total dollar/rupee volume for the previous day (31 January 2013) was US$ 89.98 million. Given are some forward dollar rates that prevailed in the market: one month – 127.28; three months – 129.20; six months – 131.88.