Bond market closes on positive note

• Foreign inflow for the first time in three weeks
• Money market liquidity continues to improve 
• Rupee appreciates

By Wealth Trust Securities

The secondary bond market witnessed some volatility during the week ending 25 October, with yields increasing during the early part of the week and reducing once again towards the latter part of the week.

Yields on the mostly traded maturities of 15.06.24, 15.09.24 and 15.09.34 increased to intraweek highs of 10.02%, 10.04% and 10.73%, respectively, before bouncing back to weekly lows of 9.92%, 9.90%, and 10.61%. The downward momentum was supported by the outcome of the weekly Treasury bill auction, where weighted averages decreased across all maturities for a second consecutive week. In addition, the maturities of 15.12.21, 2022’s (i.e. 01.07.22 and 01.10.22), 2023’s (i.e. 15.03.23, 15.05.23, 15.07.23 and 15.12.23), 01.06.26 and 2027’s (i.e. 15.01.27 and 15.06.27) changed hands at levels of 8.65% to 8.70%, 9.51% to 9.78%, 10.17% to 10.25% and 10.22% to 10.35%, respectively. 

In the meantime, foreign buying too returned to the market with an inflow of Rs. 1.97 billion for the week ending 23 October, reversing outflows witnessed over the previous two weeks.

The daily secondary market Treasury bond/bills transacted volume for the first four days of the week averaged Rs. 11.03 billion.  

In money markets, the overall liquidity in the system improved for a third consecutive week as well, recording a net deficit of Rs. 1.8 billion against its previous week’s net deficit of Rs. 2.05 billion. Overnight call money and repo rates averaged 7.46% and 7.50%, respectively, for the week. The Central Bank Open Market Operations (OMO) Department injected liquidity during the early part of the week by way of overnight reverse repo auctions at weighted average yields ranging from 7.47% to 7.55%.

Rupee appreciates  

In the forex market, the rupee, on its spot contacts, were seen appreciating during the week to close the week at levels of Rs. 181.30/45 against its previous weeks closing levels of Rs. 181.95/10 on the back of selling interest by banks.

The daily USD/LKR average traded volume for the first four days of the week stood at $ 63.56 million.

Some of the forward dollar rates that prevailed in the market were 1 month – 181.95/15; 3 months – 183.15/30, and 6 months – 185/15