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By Wealth Trust Securities
The secondary market bond yield curve was seen steepening during the week ending 29 March due to a sharp drop in yields on the short end of the curve than that of the belly to the long end of the curve.
Aggressive buying interest by foreign and local market participants on the short end of the curve, driven by the outcome of the weekly Treasury bill auction at where the 364 day bill weighted average was seen hitting a 19 week low of 10.40% saw yields on the maturities of 01.05.20 and the three 2021’s (i.e. 01.03.21, 01.08.21 and 15.12.21) dipping to intraweek lows of 10.25%, 10.40%, 10.50% and 10.55% respectively against its weeks opening highs 10.41%, 10.55%, 10.80% and 10.72%. In contrast, medium to long end maturities of 15.03.24, 01.08.26, two 2027’s (i.e. 15.01.27 and 15.06.27) and 01.05.29 were seen changing hands within a narrow range of 11.05% to 10.98%, 11.18% to 11.10%, 11.25% to 11.20%, 11.35% to 11.30% and 11.46% to 11.38% respectively.
At the secondary bill market, February and March 2020 maturities were seen hitting lows of 10.20% each as well.The foreign holding in Rupee bonds continued to increase with an inflow of Rs. 1.62 billion for the week ending 27 March and the Colombo Consumer Price Index (CCPI) for the month of March reflected a further increase for a third consecutive month, to hit a six month high of 4.3% on its point to point. The annual average remained steady at 4.1%. The CCPI Core inflation was seen increasing as well on both its point to point and annualised average to record 5.6% and 4.0% respectively.
The daily secondary market Treasury bond/bill transacted volume for the first four days of the week averaged Rs. 8.67 billion.
In money markets, the overnight call money and repo rates decreased further during the week to average 8.58% and 8.66% respectively for the week as the Open Market Operations (OMO) Department of Central Bank continued to inject liquidity during the week on an overnight basis at a weighted average rates ranging from 8.58% to 8.70% in addition to injecting funds by way of seven and fourteen day reverse repo auctions at weighted average yields ranging from 8.50% to 8.68%. The total outstanding market liquidity shortfall decreased to Rs. 59.67 billion.
Rupee appreciates considerably
In the Forex market, the Rupee on its spot contracts appreciated considerably during the week to close the week at Rs. 175.30/50 against its previous day’s closing level of Rs. 178.00/15 on the back of exporter conversion and seasonal remittances. The daily USD/LKR average traded volume for the first four days of the week stood at $ 108.18 million.
Some of the forward dollar rates that prevailed in the market were one month – 176.20/40; three months – 178.00/30 and six months – 180.60/00
