A week of fluctuations ends on a steady note

By Wealth Trust Securities

Secondary market bond yields were seen fluctuating during the week ending 02 February before closing on a steady note, on a week on week basis. 

Buying interest sailed into the market during the early part of the week following the successful Treasury bond auction results where the recorded weighted averages were below market expectations, with the total offered amount of Rs. 80.00 billion been successfully subscribed. This led to yields on the liquid maturities of the two 2026’s (i.e. 01.06.26 and 01.08.26), 15.06.27 and 15.01.33 decreasing to weekly lows of 9.20%, 9.60%, 9.62%, 9.65% and 10.00% respectively. The downward trend was further supported by the outcome of the weekly Treasury bill auction at where the weighted average on the 364 day bill remained steady for the first time in three weeks coupled with the outcome of inflation for the month of January 2018 as it decreased further to a six month low of 5.8% on its point to point. However selling interest, mainly on the 2019 maturities towards the latter part of the week saw yields pull back on the rest of the yield curve with the two 2026’s (i.e. 01.06.26 and 01.08.26), 15.06.27 and 15.05.30 maturities increasing once again to intraweek highs of 9.70% each, 9.75% and 9.95% respectively, assisting a steady close on the yield curve on a week on week basis.  The short end maturities of 2019 and 2021 were traded within the range of 8.88% to 9.18% and 9.20% to 9.26% respectively while in the secondary bill market, May 2018, October 2018, November 2018 and January 2019 maturities were traded at levels of 7.83% to 7.86%, 8.52%, 8.57% and 8.80% to 8.95% respectively. 

 The foreign holding in Rupee bonds was seen increasing by a further Rs. 1.98 billion during the week ending 30 January, recording its third consecutive week of inflows.

The daily secondary market Treasury bond/bill transacted volume for the first three days of the week averaged Rs. 12.53 billion.

In money markets, overnight call money and repo rates remained mostly unchanged to averages 8.14% and 7.55% respectively, as the average net surplus liquidity in the system increased to Rs.27.69 billion for the week. The Open Market Operations (OMO) Department of Central Bank was seen mopping up liquidity during the week by way of overnight repo auctions at weighted averages of 7.25% to 7.27%. 

Further it drained out excess liquidity by way of auctions for outright sales of Treasury bills and term repo auctions at weighted average ranging from 7.35% to 7.60% for a period of 4 days to 59 days. 

 Rupee depreciates during the week  

The USD/LKR rate on spot contracts depreciated during the week to close at levels of Rs. 154.30/40 against its previous weeks closing level of Rs. 153.65/75 on the back of importer demand and buying interest by banks outweighing export conversions. 

The daily USD/LKR average traded volume for the three days of the week stood at $ 126.27 million. 

Some of the forward dollar rates that prevailed in the market were 1 Month - 155.05/20; 3 Months  - 156.90/00 and 6 Months - 159.15/25.