Parallel shift upwards of yield curve for 2nd consecutive week

By Wealth Trust Securities

The sluggish sentiment in the secondary bond market prevailed for a second consecutive week ending 6 October driven by a slowdown in foreign purchases of Rupee bonds, an increase in the weekly Treasury bill weighted averages and continued local investor selling interest to reflect an parallel shift upward of the overall yield curve for a second consecutive week. 

Yields on the liquid maturities of the three 2021’s (i.e. 01.03.21, 01.08.21 and 15.12.21), 01.08.24, 01.08.25, 01.08.26 and 15.05.30 were seen increasing to weekly highs of 10.10%, 10.25%, 10.30%, 10.35%, 10.65%, 10.45% and 10.70% respectively against its previous weeks closings of 9.90/00, 9.95/10, 9.90/00, 10.10/20, 10.30/40, 10.24/28 and 10.55/70 as activity remained moderate.

The foreign holding in Rupee bonds recorded a marginal increase of Rs. 1.97 billion for the week ending 4 October while the daily traded secondary market Treasury bill/bond volume for the first three days of the week averaged Rs. 5.30 billion.

The overnight call money and repo rates averaged 8.12% and 7.98% respectively as the net surplus liquidity averaged Rs. 17.98 billion for the week. The OMO department of Central Bank was seen draining liquidity throughout the week on an overnight basis at a weighted average of 7.26%. 

Rupee continues to decline

In the Forex market, the USD/LKR rate on the spot rate continued its declining trend on the back of importer demand to end the week at Rs. 153.20/28 against its previous weeks closing of Rs. 153.05/15.

The daily USD/LKR average traded volume for the three days of the week stood at $ 37.98 million.

Some of the forward dollar rates that prevailed in the market were one month – 153.95/10; three months – 155.75/90 and six months – 157.80/00.