Bond yields decrease ahead of monetary policy announcement

• First round of primary bill auction excluding W.H.T to be conducted today
• Liquidity turns positive once again

 By Wealth Trust Securities

The secondary bond market yields were seen closing the day lower yesterday against its previous day’s closings, subsequent to increasing in the morning hours of trading. 

Selling on the two liquid maturities of 15.03.23 and 01.09.28 saw their yields increase to daily highs of 10.75% and 11.16% respectively. However, buying interest from this point onwards, predominately by foreign participants, saw their yields dip once again to hit intraday lows of 10.65% and 11.00% respectively. 

In addition, a limited amount of activity was witnessed on the 01.08.26 maturity within the range of 10.85%-10.87% and the 01.11.2019 maturity at 10.20% as well.

This was ahead of today’s monetary policy announcement and its second for 2018, due at 7.30 a.m. The Central Bank of Sri Lanka kept policy rates unchanged at its announcement on 15 February 2018.

At today’s weekly Treasury bill auction, the total offered amount will increase to a four-week high of Rs. 28 billion consisting of Rs. 5 billion on the 91 day, Rs. 7 billion on the 182 day and a further Rs. 16 billion on the 364 day maturities respectively. 

This will be the first Treasury bill auction conducted in line with the new Inland Revenue Act, which excludes the 10.00 % With Holding Tax (WHT). At last week’s auction, the weighted average on the 364 day bill increased by three basis points to 9.69% while all bids received on the 182 day and 91 day bills were rejected.The total secondary market Treasury bond/bill transacted volumes for 29 March 2018 was Rs. 7.25 billion.

Given below are the closing, secondary market yields of the most frequently traded T-bills and bonds.

 In money markets, net liquidity was seen turning positive once again yesterday to record a surplus of Rs. 11.67 billion. Overnight call money and repo rates averaged 8.49% and 8.45% respectively as the Open Market Operations (OMO) Department of the Central Bank infused an amount of Rs. 25.45 billion by way of a two-day reverse repo auction at a weighted average of 8.60%.

Rupee loses

 In the Forex market, the USD/LKR spot rate was seen losing yesterday, to close the day at Rs. 155.70/85 against its previous day’s closing level of Rs. 155.20/25 on the back of importer demand outweighing seasonal inflows.

The total USD/LKR traded volume for 2 April 2018 was $ 146.50 million.

Given below are some of the forward USD/LKR rates that prevailed in the market: 1 Month -156.50/653 Months -158.05/256 Months- 160.35/55