Yield curve shifts up for second consecutive week

• Foreign buying continues for a fourth consecutive week 
• Term liquidity injected by way of outright purchases of T. Bills
• Rupee dips during the week

By Wealth Trust Securities

The upward momentum in secondary market bond yields witnessed during the previous week continued during the week ending 15 February as well. The outcome of the weekly Treasury bill auction, where the weighted average on 364 day bill was seen increasing for the first time in eight weeks coupled with selling interest was seen as the reasons behind the increase in yields. 

Activity was witnessed across the yield curve as the liquid maturities of two 2021’s (i.e. 01.08.21 and 15.12.21), 15.12.23, 15.03.25, 01.08.26, two 2027’s (i.e. 15.01.27 and 15.06.27), 01.09.28 and 01.05.29 saw its yields edge up to intraweek highs of 11.08%, 11.06%, 11.10%, 11.30%, 11.40%, 11.41%, 11.43%, 11.48% and 11.62% respectively against its previous weeks closing levels of 10.95/00, 10.98/05, 11.00/10, 11.15/25, 11.20/30, 11.28/30, 11.34/40, 11.35/45 and 11.45/60 reflecting an upward shift of the yield curve week on week. However, the upward trend was seen halting towards the latter part of the week on the back of renewed buying interest.

The increase in yields was despite the foreign holding in Rupee bonds increasing for a fourth consecutive week to record an inflow of Rs. 3.3 billion for the week ending 13 February.

The daily secondary market Treasury bond/bill transacted volume for the first four days of the week averaged Rs. 3.87 billion. 

The Central Banks OMO department was seen infusing liquidity throughout the week by way of overnight and term (i.e. six and seven day) reverse repo auctions at a weighted average of 8.92% to 8.98%. In addition, a total of Rs. 7.6 billion was injected by way of outright purchases of Treasury Bills for durations ranging from 137 to 301 days at weighted averages ranging from 9.70% to 10.50%. The total outstanding market liquidity shortfall stood at 113.17 billion as call money and repo averaged 8.98% and 9.00% respectively for the week.

 

Rupee loses further during the week

The rupee on spot contracts depreciated further during the week to close the week at Rs. 178.70/80 against its previous weeks closing level of Rs. 177.70/85 on the back of continued buying interest from banks and importer demand. The daily USD/LKR average traded volume for the four days of the week stood at $ 79.60 million.

Some of the forward dollar rates that prevailed in the market were one month – 179.55/75; three months – 181.50/80 and six months – 184.45/85.