A spike on the shorter tenure distorts yield curve

Tuesday, 6 November 2012 00:00 - - {{hitsCtrl.values.hits}}

An increase in yields on the shorter tenor of the yield curve distorted the bond yield curve yesterday as the one year and four month bond was seen been offered at 12.75% yesterday, higher than the three and five year bond levels of 12.55% and 12.65% respectively. However activity was very limited yesterday as thin volumes were seen changing hands mainly on the five year maturity once again while most participants were seen adopting a wait and see approach ahead of Thursdays budget reading.

The Central bank refrained from conducting any Open Market Operation (OMO) yesterday as market liquidity was at a surplus of Rs 0.94 Bn after a lapse of two days. Call money and repo rates remained steady to average 10.54% and 9.68% respectively.

Meanwhile in Forex markets yesterday, the rupee remained stable at levels of Rs 130.40 – Rs.130.45 as volumes traded were rather moderate. The total USD/LKR traded volume for the previous day (02-11-12) stood at US $ 39.95 million.

Some of the forward dollar rates that prevailed in the market, 1 Month - 130.70; 3 Months - 133.00 and 6 Months - 136.02. (Source: Wealth Securities Ltd)