Bond market turns bullish

• Yield curve records a parallel shift downwards
• Foreign outflows continue

By Wealth Trust Securities

The secondary bond markets turned bullish during the week as yields were seen decreasing, reversing an upward trend witnessed during the previous few weeks. Considerable local buying interest was seen outweighing foreign selling across the yield curve as yields on the maturities of 15.09.19, 15.12.21, 15.07.23, 01.08.24, 15.10.25, 01.08.26, 15.06.27 and 01.09.28 were seen hitting weekly lows of 10.75%, 11.70%, 11.80%, 11.95%, 12.02%, 12.18%, 12.20% and 12.27% respectively against its previous weeks closing levels of 10.95/15, 11.95/03, 12.00/25, 12.00/35, 12.25/40, 12.25/45, 12.45/50 and 12.40/65. This translated to a parallel shift downwards of the overall yield curve, while the same buying momentum was seen flowing over to the secondary bill market with the 364 day bill changing hands at levels of 11.13% to 11.15% as well. 

A thirteenth consecutive week of foreign outflows from the rupee bond market saw its holding reduce by a further Rs. 5.18 billion for the week ending 28 November. Meanwhile, inflation for the month of November was seen increasing on its point to point to 3.3% against its previous of 3.1% while its annualised continued to decrease to record 4.6% from 5.0%. 

The daily secondary market Treasury bond/bill transacted volume for the first four days of the week averaged Rs. 7.75 billion. 

In money markets, the call money and repo rates averaged 8.96% and 8.87% respectively for the week as the Open Market Operations (OMO) Department of Central Bank was seen injecting liquidity throughout the week by way of overnight, seven days and fourteen days reverse repo auctions at weighted averages ranging from 8.44% to 8.75%. Liquidity averaged a net deficit of Rs. 49.05 billion for the week.   

Rupee closes the week stronger

 The rupee on a week on week basis was seen closing a week stronger than its previous week for the first time in seven weeks as it closed the week ending 30 November at Rs. 178.90/10 against its previous weeks closing of Rs. 179.50/00 subsequent to dipping top a new low of Rs. 180.85 during the week. The appreciation was driven by selling interest by banks which outweighed foreign outflows and importer demand.

The daily USD/LKR average traded volume for the first four days of the week stood at $ 63.53 million. 

Some of the forward dollar rates that prevailed in the market were 1 month - 179.90/30; 3 months - 182.00/40 and 6 months - 185.00/50.