Secondary market bond yields see saw

• Parallel shift upward of the yield curve 
• Rs. 120 billion in primary bond auctions in focus
• Foreign inflow for the first time in four weeks 
• Money market liquidity improves to over a seven months high 
  
   

By Wealth Trust Securities

The secondary market bond yields were seen see sawing during the week ending 26 April, as intensified selling interest on Monday led to yields increasing considerably on the liquid maturities of 01.08.21, 15.03.24, 15.01.27 and 01.05.29 to intra-week highs of 10.50%, 11.20%, 11.50% and 11.40% respectively.  

Nevertheless, renewed local buying interest leading to the weekly Treasury bill auction and subsequent to it saw yields decreasing once again with the said maturities hitting lows of 10.35%, 10.90%, 11.10% and 11.20% respectively. 

At the weekly bill auction, the weighted averages on the 91 day and 182 day bills decreased by six and five basis points respectively while the weighted average on 364 day bill remained steady 9.91%. However, activity moderated towards the end of the week with yields edging up once again and two way quotes widening ahead of today’s Treasury bond actions.  The overall yield curve recorded a parallel shift upward week on week. 

Today’s Treasury bond auctions, in lieu of a Treasury bond maturity of Rs. 93.9 billion will have in total an amount of Rs.120 billion on offer, consisting of Rs.45 billion on a four year and 10 month maturity of 15.03.2024 and Rs.75 billion on a new 11 year and 10 month maturity of 15.03.2031. The weighted average yields at the auctions conducted on 2 April for the maturities of 15.03.2022 and 15.01.2027 were recorded at 10.72% and 11.24% respectively. 

The foreign holding of Sri Lankan rupee bonds recorded an inflow for the first-time in four weeks with an increase of Rs.0.26 Billion for the week ending 24 April.

The daily secondary market Treasury bond/bill transacted volume for the first three days of the week averaged Rs. 4.06 billion. 

In the money market, the overall liquidity shortfall was seen reducing to Rs. 3.54 billion by the end of the week, to a level last seen during mid-September 2018 against its previous weeks Rs.34.71 billion.

The overnight call money and repo rates averaged 8.53% and 8.65% respectively for the week as the Open Market Operations (OMO) Department of Central Bank continued to inject liquidity during the week on an overnight basis at weighted average yields ranging from 8.50% to 8.54%. In addition, it injected funds by way of seven to thirteen day reverse repo auctions at weighted average yields ranging from 8.51% to 8.59% as well. 

 Rupee dips   

In the Forex market, the USD/LKR rate on spot contracts depreciated during the week to close at Rs.175.25/50 against its previous weeks closing level of Rs.174.05/25 on the back of buying interest by Banks and importer demand.  

The daily USD/LKR average traded volume for the first four days of the week stood at $31.21 million. 

Some of the forward dollar rates that prevailed in the market were one month - 177.00/20; three months - 179.05/25 and six months - 182.00/20.