Bond market activity dries up

• Foreign outflows continue for a second consecutive week 

By Wealth Trust Securities

 The trading activity in the secondary bond market dried up considerably during the week ending 11 May, subsequent to yields increasing during the early part of the week. Foreign and local selling interest across the yield curve saw yields on the 2019 maturities (i.e. 01.07.19 & 15.09.19), 01.08.21, 15.03.23, 01.08.24, 01.08.26, 15.06.27 and 01.09.28 increase to weekly highs of 9.85%, 9.95%, 10.27, 10.48%, 10.55%, 10.70%, 10.78% and 10.75% respectively against its previous weeks closings of 9.75/85, 9.85/95, 10.05/15, 10.40/45, 10.45/55, 10.50/60, 10.50/65 and 10.60/68. 

The upward and lacklustre sentiment was further supported by the increase in the 364 day bill weighted average for a second consecutive week and substantial foreign outflows from Rupee bonds for a second consecutive week as well. The foreign outflow for the week ending 9 May was recorded at Rs. 4.05 billion and totalling Rs. 9.30 billion over the past two weeks.  

The daily secondary market Treasury bond/bill transacted volumes for the first three days of the week averaged Rs. 7.46 billion.

In money markets, the overnight call money and repo rate averaged at 7.89% and 7.97% respectively for the week as the OMO department of Central Bank continuously drained out liquidity by way of overnight repo auctions at weighted averages ranging from 7.50% to 7.59%. The average net surplus liquidity for the week stood at Rs.6.20 billion. 

Rupee dips during the week

The USD/LKR rate on spot contracts was seen closing the week lower at Rs. 157.85/00 against its previous weeks closing of Rs. 157.50/65 on the back of renewed importer demand. 

The daily USD/LKR average traded volume for the first three days of the week stood at $95.08 million. 

Some of the forward dollar rates that prevailed in the market were 1 Month - 158.50/70; 3 Months - 159.70/00 and 6 Months - 161.90/10.