4-year bond yield hits 10-month high

By Wealth Trust Securities

Secondary market bond yields were seen increasing further during the week ending 27 January, backed by the prevailing negative sentiment, foreign selling in rupee bonds and rising yields at the weekly Treasury bill auction.

The four-year maturities of 01.03.21, 01.05.21 and 01.08.21 were the most actively traded during the week, with its yields increasing by 40, 35 and 45 basis points respectively week on week to 10-month highs of 12.55%, 12.65% and 12.70%. These trades were closely followed by the 15.11.18 maturity reflecting an increase of 15 basis points to a high of 11.60% and the seven-year maturity of 01.08.24 increasing by 15 basis points to a high of 12.60% on the back of foreign selling interest. Foreign selling in rupee bonds for the week ending 25 January recorded an outflow of Rs. 1.2 billion. 

However, the Treasury bond auctions conducted on Friday were seen recording abnormal weighted averages, well below its secondary market levels. 

The 4.10 year maturity of 15.12.2021 and the 7.06 year maturity of 01.08.2024 recorded weighted averages of 12.19% and 12.39%, in comparison to its secondary market pre-auction yields of 12.50/70, 12.55/60 and above its previous weighted averages of 12.16% each. All bids received for the 1.11 year maturity of 15.01.2019 were rejected. Only an amount of Rs. 10.54 billion was accepted in total at the auction against a total offered amount of Rs. 33 billion. 

Meanwhile in money markets, overnight call money and repo rates remained mostly unchanged to average 8.39% and 8.44% respectively, as the average net surplus liquidity in the system stood at Rs. 55.98 billion for the week. The Open Market Operations (OMO) Department of the Central Bank was seen mopping up liquidity during the week by way of overnight repo auctions at weighted averages of 7.53% to 7.54%. 

Rupee appreciates during the week  

The USD/LKR rate on active two weeks and one month forward contracts appreciated during the week to close at levels of Rs. 150.80/95 and Rs. 151.25/40 against its previous weeks closing level of Rs. 150.85/00 and Rs. 151.40/70. 

The daily USD/LKR average traded volume for the first four days of the week stood at $ 75.20 million. 

Some of the forward dollar rates that prevailed in the market were three months - 152.92/00 and six months - 155.50/70.