By Wealth Trust Securities

The three Treasury bond auctions conducted yesterday drew over Rs. 30 billion in successful bids against its initial total offered amount of Rs. 24 billion. The amount accepted on the 2.06 year maturity was seen nearly doubling to Rs. 15.60 billion against its offered amount of Rs. 8 billion. 

Activity in the secondary bond market picked up yesterday following the outcome of the bond auctions. Yields on the auctioned maturities were seen declining to intraday lows of 11.45%, 11.65% and 11.85% respectively against its post auction highs of 11.50%, 11.75% and 11.90%. Movements on the rest of the yield curve stayed muted.  

The liquidity in money markets was seen increasing for a second consecutive day to record a net surplus of Rs 8.01 billion as call money and repo averaged 8.13% and 8.00% respectively. 

Rupee dips marginally once again

The USD/LKR rate on the active spot next contract was seen dipping once again to Rs. 146.40/60 yesterday against its previous day’s closing of Rs 146.35/50. The total USD/LKR traded volume for 27 April was $ 109.12 million. 

Some of the forward USD/LKR rates that prevailed in the market were: one month – 147.30/50; three months – 149.15/45; and six months – 151.55/00.

Rupee forwards retreat on importer dollar demand

Reuters: Five-day rupee forwards ended slightly weaker, erasing early gains as importer dollar demand surpassed greenback sales by foreign banks to facilitate buying of Government securities, dealers said.

“Foreign banks sold dollars today. Rupee ended weaker as there was some importer demand, which came in later in the day,” said a local bank currency dealer, requesting not to be named.

A dealer from a foreign bank said foreign investors have been buying Government securities and more inflows are likely if Sri Lanka gets an International Monetary Fund loan. A staff-level agreement with IMF on the loan is expected as early as this week.

However, the dealer said a few foreign investors were also selling bonds.

The rupee has been under pressure due to foreign investors selling Government securities amid Sri Lanka’s economic woes, but they net bought bonds worth Rs. 11.7 billion ($79.92 million) in the four weeks to 20 April, Central Bank data showed.

Five-day forwards, which are known as spot next, and act as a proxy for the spot currency, ended at 146.50/70 per dollar compared with Wednesday’s close of 146.40/45.

Dealers were also analysing the impact of Finance Minister Ravi Karunanayake’s move after he asked exporters last week to bring home their earnings, received on or after 1 April, to improve foreign exchange inflows.

Sri Lankan exporters are holding earnings worth around $3 billion abroad according to the Central Bank’s estimates, Governor Arjuna Mahendran said on Tuesday.

The spot rupee, which has barely seen any trading since 27 January, was not actively traded on Thursday as well.

Bourse ends higher led by large-caps

Reuters: Shares rose for a third straight session on Thursday led by large-caps on positive sentiment after the Central Bank left rates steady earlier this week.

However, analysts said investors were cautious and awaited the outcome of a loan deal with the International Monetary Fund.

The benchmark stock index ended up 0.13% at 6,442.53, its highest close since 14 January.

“It looks like new phase of wind blowing through the market. The negativity is fading away and buying is coming in slowly,” said Reshan Kurukulasuriya, Chief Operating Officer at Richard Pieris Securities Ltd.

The Central Bank kept benchmark rates steady on Tuesday, as expected, as it gauges the effect of the recent tightening amid final stages of talks with the IMF for a $1.5-billion loan to tide over a payments crisis.

Yields on short-term Government securities were also steady at a weekly auction on Wednesday.

The measures also signalled market interest rates may not rise as early as the market expected.

Turnover stood at Rs. 560.1 million, less than this year’s daily average of around Rs. 767.8 million rupees.

Foreign investors were net buyers of Rs. 15.5 million ($106,382.98) worth of equities on Thursday, but have been net sellers of Rs. 2.97 billion worth of shares so far this year.

Shares in Ceylon Tobacco Company Plc rose 0.91% while Ceylon Cold Stores Plc rose 2.85%.