Yield curve shifts up for a second consecutive week

• Foreign buying returns back to the bond market

By Wealth Trust Securities

The upward trend in secondary market bond yields witnessed during the previous week, continued during the week ending 18 August as well. 

The outcome of the weekly Treasury bills auction, where weighted averages were seen increasing for the first time in seventeen weeks with its accepted amount totalling only Rs.17.57 billion against its total offered amount of Rs.28 billion and selling interest along with profit taking was seen as the main reasons behind the upward momentum. 

Selling interest in the liquid maturities of the three 2021’s (i.e. 01.03.21, 01.08.21 and 15.12.21), 15.05.23, 01.08.24, 01.08.26 01.09.28 and 15.05.30 saw its yields hit intraweek highs of 10.58%, 10.60%, 10.68%, 10.90%, 10.80%, 10.95%, 11.09% and 11.13% respectively against its previous weeks closing levels of 10.32/35, 10.40/43, 10.22/30, 10.70/80, 10.60/75, 10.70/85, 10.90/98 and 11.00/05 reflecting an upward parallel shift  of the overall yield curve for a second consecutive week. 

However, buying interest at these levels curtailed any further upward movement as activity moderated significantly towards the latter part of the week. 

Meanwhile, the foreign holding in Rupee bonds was seen recording an inflow after a lapse of two weeks to the tune of Rs.9.02 billion for the week ending 16th August 2017.

The daily secondary market Treasury bond/bill transacted volume for the first four days of the week averaged Rs.9.22 billion. 

In money markets, the overnight call money and repo rates decreased further to average at 8.57% and 8.43% respectively for the week as the average net surplus liquidity in the system stood at Rs.18.27 billion. The OMO department of the Central Bank continuously drained out liquidity by way of overnight repo auctions at weighted averages ranging from 7.28% and 7.30%. 

Rupee dips

The rupee on spot contracts depreciated during the week to close at Rs.153.32/40 against its previous weeks closing levels of Rs.153.06/10 on the back of importer demand. 

The daily USD/LKR average traded volume for the four days of the week stood at $ 34.40 million. 

Given are some forward dollar rates that prevailed in the market: one month – 154.20/30; three months – 156.15/25; six months – 158.75/85.