Renewed selling interest sees bond yields increase

• Liquidity shortage increase further 

By Wealth Trust Securities

Renewed selling interest on the back of an increasing liquidity shortage saw secondary bond market yields increasing yesterday; reversing the bullish trend witnessed the previous day following the impressive weekly Treasury bill auction outcome. The yields on the liquid maturities of 15.12.21 and 01.08.26 rose to intraday highs of 11.40% and 11.67% respectively against its previous day’s lows of 11.25% and 11.55% while the maturities of 2021’s (i.e. 01.03.21, 01.05.21 and 01.08.21) and 15.06.27 changed hands at levels of  11.28% to 11.30% and 11.69% to 11.70% respectively. 

The total secondary market Treasury bond/bills transacted volume for 2 January was Rs. 9.81 billion.

In the money market, the net liquidity shortfall increased further yesterday to Rs. 113.93 billion against its previous day of Rs. 103.93 billion and Rs. 78.64 billion as of 1 January. The OMO Department of the Central Bank infused liquidity by way of an overnight and a seven-day term reverse repo auction for successful amounts of Rs. 25 billion and Rs. 10 billion, at weighted average yields of 8.99% and 9.00%.

Interestingly an amount of Rs. 115.17 billion was granted through CBSL’s window rate of 9.00% as well. In addition, it injected an amount of Rs. 740 million in total through an auction for outright purchase of Treasury bills at weighted average rates of 9.57% and 10.75% respectively for durations of 77 to 336 days, valued today. The call money rate stood at 8.99% while no repo transactions were reported.

Rupee remains steady

The USD/LKR rate on spot contracts remained mostly unchanged for a second consecutive day to close the day at levels of Rs. 182.80/90 as markets remained at equilibrium.

The total USD/LKR traded volume for 3 January was $ 77.02 million.

Some of the forward USD/LKR rates that prevailed in the market were 1 Month – 183 65/00; 3 Months – 185.65/00; 6 Months – 188.55/05.