A week of mix fortunes witnessed in secondary bond market

• Foreign holding in rupee bonds continues to slide 

By Wealth Trust Securities

Yields in the secondary bond market seesawed during the week ending 24 August 2018, as it initially increased with the liquid maturities of 15.07.23 and 01.08.24 hitting weekly highs of 10.02% and 10.15% respectively against its previous week’s closing levels of 9.93/98 and 9.98/05, prior to decreasing towards the end of the week to hit lows of 9.92% and 10.00%. 

Furthermore, the 2019’s (i.e. 01.07.19 and 15.09.19), 01.05.20, 2021’s (i.e. 01.03.21 and 01.05.21) and 2028’s (i.e. 15.03.28 and 01.09.28) were seen changing hands at levels of 8.83% to 9.10%, 9.34% to 9.35%, 9.55% to 9.75% and 10.30% to 10.36% respectively. 

Meanwhile, the foreign component in rupee bonds was seen declining for a 17th consecutive week to record an outflow of Rs. 7.54 billion. 

At the weekly Treasury bill auction, the 91 day and 182 day bills decreased by one and two basis points respectively to 8.09% and 8.60% while the weighted average yield of the 364 day remained steady at 9.00%. 

The daily secondary market Treasury bond/bill transacted volume through the first three days of the week averaged Rs. 6.55 billion.

In money markets, the Open Market Operations (OMO) Department drained out liquidity during the week on an overnight basis at weighted averages ranging from 7.52% to 7.58% in addition to mopping up liquidity on a permanent basis by way of term repo auctions at weighted averages ranging from 7.57% to 7.68% for durations ranging from four days to seven days as the average net surplus liquidity in the system stood at Rs. 27.80 billion. The overnight call money and repo rate averaged at 7.80% and 7.75% respectively. 

 Rupee continues to depreciate   

The USD/LKR rate on spot contracts depreciated considerably during the week to a low of Rs. 161.00 before closing at Rs. 160.85/00 against its previous weeks closing level of Rs. 160.50/58 on the back of importer demand and strengthening dollar. 

The daily USD/LKR average traded volume for the first three days of the week stood at $ 51.58 million. 

Some of the forward dollar rates that prevailed in the market were one month - 161.65/95; three months - 163.25/55 and six months - 165.65/95.