Yield curve reflects marginal shift downwards for first time in three weeks

By Wealth Trust Securities

The secondary market bond yields decreased marginally during the week ending 13 October driven by renewed buying interest mainly from foreign market participants.

Foreign buying in rupee bonds continued for a fifth consecutive week, recording an inflow of Rs. 2.67 billion for the week ending 11 October.  

Buying interest on the maturities of the two 2021’s (i.e. 01.03.21 and 01.08.21), 01.10.22, 15.05.23, 01.01.24, 15.03.25, 01.08.26, 15.06.27, 01.09.28 and 15.05.30 saw its yields dip to weekly lows of 10.02%, 10.00%, 10.13%, 10.20%, 10.27%, 10.41%, 10.32% each, 10.40% and 10.65% respectively against its previous weeks closing levels 10.00/10, 10.10/15, 10.20/30, 10.20/35, 10.30/40, 10.40/50, 10.35/40, 10.40/50, 10.50/70 and 10.65/75. 

In addition, 2019 maturities were seen changing hands within the range of 9.60%-9.80% during the week as well. Nevertheless, activity was seen drying up considerably towards the latter part of the week with buying interest slowing down.

This was despite the weighted averages at the weekly bill auction increasing for a third consecutive week, with the 91 day, 182 day and 364 day bills recording increases of seven, two and nine basis points respectively to 8.78%, 9.10% and 9.41%.

The daily secondary market Treasury bond/bill transacted volume for the first four days of the week averaged Rs. 6.15 billion.

In money markets, the OMO department of the Central Bank was seen draining out excess liquidity throughout the week on an overnight basis at weighted averages of 7.25% and 7.26% as the net surplus liquidity in system remained high to average Rs. 16.06 billion for the week. The overnight call money and repo rates averaged 8.14% and 7.93% respectively during the week ending 13 October 2017.

Value of rupee dips during week

In the Forex market, the downward trend in the value of the rupee continued as the USD/LKR spot rate was seen hitting a weekly low of Rs. 153.78 and closing the week at Rs. 153.60/70 against its previous week’s closing levels of Rs. 153.20/28 on the back of continued importer demand outweighing inward remittances.

The daily USD/LKR average traded volume for the four days of the week stood at $ 64.10 million.

Some of the forward dollar rates that prevailed in the market were one month - 154.40/50; three months - 156.20/30 and six months - 158.50/70.