Bond market activity gathers momentum

• Foreign selling in rupee bonds continue

By Wealth Trust Securities

The secondary bond market gathered momentum during the week ending 1 June 2018 on the back of impressive primary auction outcomes. Firstly, the Treasury bond auctions drew Rs. 90 billion in successful bids with the 4 year 9 month maturity of 15.03.2023 and the 9 year 9 month maturity of 15.03.2028 recording weighted averages of 10.51% and 10.72% respectively against its pre-auction secondary market yields of 10.40/46 and 10.70/85. Secondly, the weekly Treasury bill auction saw weighted averages decrease across the board for the first time in five weeks, with the 364 day maturity decreasing by 11 basis points to 9.62%. 

The liquid maturities of the two 2021’s (i.e. 01.03.21 and 15.12.21), 15.03.23 and 01.09.28 were seen dipping to weekly lows of 9.90%, 10.00%%, 10.32% and 10.55% respectively against previous weeks closing levels of 10.05/10, 10.10/20, 10.40/45, 10.70/80. In addition, the 01.07.19 and 15.03.28 maturities were seen dipping to lows of 9.59% and 10.55% respectively as well.

Nevertheless, the foreign holding in Rupee bonds decreased further, recording an outflow of Rs. 0.78 billion for the week ending 30 May 2018. 

The daily secondary market Treasury bond/bill transacted volumes for the first three days of the week averaged Rs. 13.50 billion.

In money markets, the Open Market Operations (OMO) Department of Central Bank drained out liquidity during the early part of the week on an overnight basis at a weighted average of 7.40% while it infused liquidity during the latter part of the week on an overnight basis at a weighted average of 8.08% to 8.32% as liquidity in the market fluctuated from surplus of Rs. 11.20 billion to deficit of Rs. 17.98 billion. The overnight call money and Repo rates averaged 7.92% and 7.91% respectively for the week. 

Rupee dips during the week 

The Rupee on its spot contracts were seen depreciating during the week to close the week at Rs. 158.55/70 against its previous weeks closing of Rs. 158.10/20 on the back of continued importer demand. 

The daily USD/LKR average traded volume for the first three days of the week stood at $ 83.24 million. 

Some of the forward dollar rates that prevailed in the market were one month – 159.45/65; three months – 161.00/15 and six months – 163.25/40.