Yield curve records downward shift for first time in 4 weeks

• Money market liquidity increases significantly  
• Rupee volatile; closes stronger

By Wealth Trust Securities

The sentiment in the secondary bond market turned positive towards the latter part of the week ending 4 December as renewed buying interest driven by a significant increase in liquidity saw bond yields decline to record a downward shift of the yield curve. 

The yields on the liquid maturities of 2022s (i.e. 15.11.22 and 15.12.22), 15.01.23, 15.09.24, 01.02.26 and 15.10.27 were seen dipping to weekly lows of 5.72%, 5.77% each, 6.44%, 6.70% and 7.20% respectively against its previous weeks closing levels of  5.75/85, 5.80/85, 5.85/90, 6.50/60, 6.75/95 and 7.20/30. 

In addition, short dated maturities of 2021s (i.e. 01.03.21, 01.08.21 & 15.10.21, 15.12.21) and additional 2023s (i.e. 15.03.23, 15.07.23, 01.09.23 and 15.12.23) traded at levels of 4.75% to 5.10% and 5.84% to 6.02% respectively as well.  Furthermore, activity in the secondary bill market saw January and February 2021, May and June 2021 and October 2021 bills change hands at levels of 4.65% to 4.69%, 4.74% to 4.76% and 4.93% to 5.00% respectively.  

Meanwhile, the foreign holding in rupee bonds recorded a meager outflow of Rs. 21.04 million for the week ending 2 December.

The daily secondary market Treasury bond/bill transacted volumes for the first four trading days of the week averaged Rs. 14.48 billion.  

In money markets, the total outstanding market liquidity increased for a fourth consecutive week to record a massive surplus of Rs. 234.95 billion against its previous week of Rs. 186.92 billion. The weighted average rates on overnight call money and repo remained mostly unchanged at 4.54% and 4.59% respectively while the CBSL’s holding of Gov. Security’s increased to Rs. 616.80 billion.

 Rupee volatile

In Forex markets, the Rupee or USD/LKR rate on spot next contacts was seen seesawing during the week but closed the week strong at Rs.185.80/00 subsequent to dipping to an intraweek low of Rs. 186.60.

The daily USD/LKR average traded volume for the first four days of the week stood at $ 41.81 million.  

(References: Central Bank of Sri Lanka, Bloomberg E-Bond trading platform, money broking companies)