Yield curve reflects parallel shift downwards

• Weekly weighted average records steep dip Foreign participants continues to reduce holding

By Wealth Trust Securities

The first trading week for the year saw the secondary bond market yield curve recorded a parallel shift downwards during the week ending 4 January 2019 on the back of local buying interest driven by the outcome of the weekly Treasury bill auction. The 364 day bill recorded a drop of 21 basis points to 10.99%. 

Activity centred on the liquid maturities of 15.12.21 and 01.08.26 as its yields were seen decreasing to weekly lows of 11.25% and 11.55% respectively against its previous weeks closing levels of 11.50/58 and 11.75/82. In addition, the 2023’s (i.e. 15.05.23 and 15.07.23), 15.03.25 and 15.06.27 was seen changing hands within the range of 11.50% to 11.72%, 11.59% to 11.80% and 11.62% to 11.82% respectively as well. In the secondary bill market the 364 day bill was seen dipping to a low of 10.80%, subsequent to the auction. 

 Nevertheless, the reduction in the foreign holding of Rupee bonds was witnessed for an 18th consecutive week recording an outflow of Rs. 6.68 billion for the week ending 2 January 2019. 

The daily secondary market Treasury bond/bill transacted volume for the first four days of the week averaged Rs. 6.82 billion. 

In the money market, the OMO (Open Market Operation) Department of Central Bank continued to inject liquidity during the week on an overnight and seven day basis at weighted averages ranging from 8.98% to 9.00% as the average net liquidity shortfall in the system stood at a high of Rs. 113.20 billion for the week. The liquidity was also infused by way of auctions for outright purchase of Treasury bills, where an amount of Rs. 0.76 billion was injected in total at weighted average yields ranging from 9.57% to 10.75% for periods of 77 to 336 days. The overnight call money and repo rates averaged 8.98% and 9.00% respectively during the week. 

Rupee appreciates   

 In the Forex market, the USD/LKR rate on spot contracts appreciated marginally to close the week at Rs. 182.65/75 against its previous day’s closing levels of Rs. 182.85/20 subsequent to trading at a high of Rs. 182.00 and low of Rs. 183.05. 

The daily USD/LKR average traded volume for the first four days of the week stood at $ 66.60 million.  

Some of the forward dollar rates that prevailed in the market were one month – 183.55/75; three months – 185.40/70 and six months – 188.45/75.