Activity in secondary bond market remains moderate

By Wealth Trust Securities

The overall activity in the secondary bond market remained moderated during the week ending 27 April 2018 with most market participants opting to be on the sidelines. However, yields of the liquid maturities of 01.03.21, 15.03.23, 01.06.26 and 01.09.28 were seen increasing during the week to hit highs of 10.00%, 10.20%, 10.34% and 10.45% respectively while two way quotes on the rest of the yield curve increased as well, registering a parallel shift upwards of the yield curve for a second consecutive week.

Nevertheless, the weighted averages of the weekly Treasury bill auction decreased further by 05 and 06 basis points respectively on the 91 day and 364 day maturities while the two bond auctions conducted during the week recorded encouraging weighted averages at either market or below market yields in comparison to its secondary market yields for similar maturities.

The market also witnessed continued foreign buying interest of rupee bonds with an inflow of Rs. 1.27 billion for the week ending 25 April, recording a total inflow of Rs. 5.79 billion over the past three weeks. Furthermore, the Point to Point inflation for the month of April decreased further to register 3.8% against 4.2% recorded in March while the annual average too decreased to 5.9% from 6.1%. The daily secondary market Treasury bond/bill transacted volumes for the first four days of the week averaged Rs. 5.05 billion.

In money markets, the OMO (Open Market Operation) Department of the Central Bank of Sri Lanka drained out liquidity during the week on an overnight basis at weighted averages ranging from 7.46% to 7.50% as the average net surplus liquidity for the week stood at Rs. 19.79 billion. The overnight call money and repo rates averaged at 7.84% and 7.90% respectively for the week.

Rupee losses considerably

The dollar rupee rate on spot contracts closed the week considerably lower at Rs. 157.80/90 against its previous weeks closing of Rs. 156.40/48 on the back of continued importer demand and a lack of export conversions.

The daily USD/LKR average traded volume for the first four days of the week stood at $ 71.54 million.

Some of the forward dollar rates that prevailed in the market were one month – 158.55/65; three months – 160.00/10 and six months – 162.30/45.