Bearish behavior continues in secondary bond markets ahead of weekly auction

Tuesday, 29 April 2014 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities Activity in secondary bond markets continued to be bearish yesterday ahead of today’s weekly Treasury bill auction, held a day prior due to a shortened trading week. Active two way quotes were mainly seen on the liquid two 2018 maturities (i.e. 1 April 2018 and 15 August 2018) and the 1 July 2019 maturity at levels of 8.72/77, 8.85/86 and 9.08/10 respectively. In addition, on the shorter leg of the yield curve, the 1 November 2015 maturity was quoted at 7.30/32 while the 1 August 2016 maturity was at 7.62/68. However, a limited amount of activity was witnessed on secondary market bills, as August 2014 bills were seen changing hands within the range of 6.60% to 6.70%, October 2014 within 6.80% to 6.90% and the November 2014 bills within 6.85% to 6.90%. Today’s weekly Treasury bill auction, will have on offer an eight week high total amount of Rs. 15 b with Rs. 0.5 b on the 91 day, Rs. 1.0 b on the 182 day and Rs. 13.5 b on the 364 day maturities respectively. At last week’s auction the weighted average’s (WAvg) on both the 91 day and 364 day bills continued its downward trend to reflect dips of three basis points and one bp respectively to 6.58% and 7.02%, while the WAvg on the 182 day bill remained unchanged at 6.79%. Overnight call money and repo rates remained steady to average 6.96% and 6.54% respectively as surplus liquidity in money markets stood at Rs. 20.80 b yesterday. Central Bank mopped up an amount of Rs. 9.97 billion through its Open Market Operations at a WAvg yield of 6.58% for a period of four days while a further amount of Rs. 10.83 b was deposited CBSL’s Standing Deposit Facility Rate of 6.50%. Rupee continues to remain steady The rupee continued to be quoted within a narrow band of Rs. 130.60-Rs. 130.63 yesterday. The total USD/LKR traded volume for the previous day (25 April) stood at $ 36.55 million. Some of the forward dollar rates that prevailed in the market were: one month – 131.13; three months – 132.21; and six months – 133.78.

Rupee flat in dull trade

REUTERS: The rupee ended flat on Monday as an early importer demand for the greenback was superseded by dollar selling by exporters, while dealers expect the currency to remain stable in the near term in the absence of a pick-up in private sector credit. The spot rupee ended at Rs. 130.59/61 per dollar from Friday’s close of Rs. 130.58/61. “There was not much of demand; this is the level it has been trading at for the last few weeks. The rupee is under appreciation pressure,” said a currency dealer asking not to be named. Many dealers said they were surprised by the lower credit demand from the private sector even though key interest rates have been at multi-year lows since January. The benchmark 91-day Treasury bill yield further dropped to its lowest since January 2007, data showed on Wednesday, a day after the Central Bank kept policy rates steady at multi-year lows. Private sector credit grew 4.4% year-on-year in February, the slowest since May 2010, latest data from the Central Bank showed. That compared with growth of 5.2% in January this year and 13.3% in February 2013. The Central Bank, in its monetary policy statement last week, expressed confidence that private sector credit growth would rebound in the second quarter and push up the pace of economic expansion. Dealers expect the rupee to trade in a range of Rs. 130.60-70 in the near future until credit growth picks up. It has been hovering between Rs. 130.55 and Rs. 130.70 since 3 March, Thomson Reuters data showed, with the Central Bank intervening to smoothen any sharp volatility.