364-day bill doubles its accepted amount at weekly auction

By Wealth Trust Securities

Continuing with recent trends, the weighted averages (WAvg) at yesterday’s Treasury bill auction dipped further for a fourth consecutive week. It was the 91-day bill which reflected the highest decline of three basis points to 9.20%, while the 182-day bill and 364-day bill dipped by one basis point each to 10.22% and 11.33% respectively.

Interestingly the accepted amount on the 364-day bill was 2.5 times more than its initial offered amount of Rs. 7 billion, which in turn helped the Central Bank accept in total an amount of Rs. 22.53 b at the auction against its initial total offered amount of Rs. 11 b.  Given are the details of the auction.

Secondary market bond yields dip marginally

In secondary bond markets, yields, dipped marginally once again mainly on the 1 April 2018 maturity to an intraday low of 11.34% against its intraday high level of 11.41%. The drop in the weekly T-bill averages, coupled with inflation hitting a 12-month low of 6.4% on the point to point, was seen as the main reasons behind the dip in yields as demand set in.

Furthermore the annualised average remained unchanged at 8.8% for the first time in 11 months as well, adding momentum to this trend. However the drop in yields was curtailed somewhat due to two other liquid five-year maturities (i.e. 15 July 2018 and 15 August 2018) trading at a premium of seven basis points above the 1 April 2018. In addition buying interest on the shorter tenure 2014, 2015 and 2016 maturities was evident as well subsequent to the release of inflation numbers.

Furthermore, demand for the 182-day bill and the 364-day bill prevailed subsequent to the auction as it closed the day at levels of 10.10/20 and 11.23/28 respectively. Given the closing, secondary market yields for the most frequently traded maturities.

Meanwhile, the surplus overnight liquidity witnessed in money markets was at Rs. 18.51 b yesterday with an amount of Rs. 15.79 b being drained by way of an overnight Repo auction conducted by the Open Market Operations (OMO) department at a WAvg of 8.36%. This in turn saw overnight call money and repo rates remain steady to average of 9.46% and 8.59% respectively.

Rupee appreciates marginally

In Forex markets, the rupee appreciated by around 15 cents yesterday to close the day at Rs. 126.65/72 in comparison to its previous day’s closing level of Rs. 126.80/85 on the back of selling interest on forward dollar contracts. The total USD/LKR volume for the previous day stood at US$ 89.93 million. Given are some forward dollar rates that prevailed in the market: one month – 127.66; three months – 129.59; six months – 132.44.