5-year Treasury yield hits highest level for 2013

Monday, 2 September 2013 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities Secondary bond market yields continued its upward trend during the week to reflect an upward parallel shift on the overall yield curve for a second consecutive week on the back of further selling pressure by foreign holders of rupee bonds and local participants as well. Accordingly a majority of activity witnessed during the week, was on the two liquid five year maturities (i.e. 1 April 2018 and 15 August 2018) within weekly lows of 11.75% and 11.78% respectively to an eight month high of 12.00%. In addition, considerable volumes were seen changing hands on two year maturities within the range of 11.15% to 11.35% during the week while the three and a half year maturity was traded within the range of 11.45% to 11.55%.

This was despite weighted averages (WAvg) at the weekly Treasury bill auction holding steady as the 182 day bill WAvg dipped by 01 basis point (bp) for a second consecutive week to 9.64% and the 364 day bill WAvg increased for the first time in three weeks by 01 bp to 10.56%, while the 91 day bill was accepted after a lapse of one week at a WAvg of 8.61%. Nevertheless the upward trend in secondary bond market yields was further supported by the increase in secondary bill market yields, with durations centring the 364 day maturity changing hands above its WAvg within the range of 10.56% to 10.70%. Meanwhile, inflation for the month of August reflected an increase on its point to point to 6.3% from 6.1% while its annualised average dipped to 8.0% from 8.3%. Surplus liquidity in money markets increased during the week from a low of Rs.2.3 billion during the start of the week to a two week’s high of Rs. 30 billion by the latter part of the week which intern saw overnight call money repo rates remain steady to average 8.73% and 8.21% respectively for the week.

The Open Market Operations (OMO) department of Central Bank refrained from conducting any form of auctions for the first three days of the week while it conducted daily and seven day repo auctions on the remaining two days in order to drain out excess liquidity from the system at steady weighted averages of 7.34% and 7.95% respectively. Nevertheless the discount window of 9.00% was also seen been accessed twice during the week. Heavy rupee fluctuations during the week The rupee on spot next contracts dipped to an all-time low of Rs. 135 at the start of the week on importer demand and foreign selling on rupee bonds according to market sources. However, interventions by authorities at these levels in order to bring stability to markets saw the rupee gain most of its lost ground to close the week at levels of Rs. 132.95/00. The total USD/LKR traded volume for the first four days of this week stood at US$ 43.28 million. Some of the forward dollar rates that prevailed in the market were; one month – 133.85; three months – 135.64; and six months – 138.19.