Bonds yields fluctuate within narrow range

• Foreign outflows once again

By Wealth Trust Securities

The secondary bond market yields were seen fluctuating within a narrow range during the week ending 26 July, initially increasing during the early part of the week and then dipping back once again towards the end of the week. 

Activity centred on the short end to the mid end of the yield curve with yields on the maturities of two 2021’s (i.e. 15.10.21 and 15.12.21), 15.07.23, two 2024’s (i.e. 15.03.24 and 15.06.24) and 15.01.27 hitting weekly highs of 9.03%, 9.00%, 9.58%, 9.80%, 9.85% and 10.00% respectively against its previous weeks closing levels of 8.85/90, 8.90/95, 9.55/60, 9.75/80, 9.80/83 and 9.98/00 on the back of profit taking.  

Nevertheless, buying interest subsequent to the weekly Treasury bill auction outcome saw it yields decreasing once again to hit lows of 8.87%, 8.90%, 9.50%, 9.75%, 9.80% and 9.97% respectively. At the auction, weighted averages decreased across the board by 10, 13 and eight basis points 7.89%, 7.96% and 8.38% on the 91-day, 182-day and 364-day maturities respectively.

The foreign holding in rupee bonds was seen decreasing for the first time in three weeks to record an outflow of Rs. 3.74 billion for the week ending 24 July, reversing an inflow of Rs. 3.89 billion witnessed over previous two weeks.

The daily secondary market Treasury bond/bills transacted volume for the first four days of the week averaged Rs. 8.90 billion. 

In money markets, the Overnight call money and repo rates averaged 7.78% and 7.85% respectively for the week as the OMO (Open Market Operation) Department of the Central Bank of Sri Lanka refrained from conducting any auctions to drain out liquidity during the week. The average net overnight liquidity surplus increased to Rs. 43.31 billion for the week.

Rupee depreciates further

The USD/LKR rate on spot contracts depreciated further during the week to close the week at levels of Rs. 176.18/25 against its previous weeks closing level of Rs. 175.80/85 on the back of importer demand and continued buying interest by banks.

The daily USD/LKR average traded volume for the first four days of the week stood at $ 95.5 million.

Some of the forward dollar rates that prevailed in the market were 1 month – 176.70/85; 3 months – 177.90/05 and 6 months – 179.85/05.