Bond markets close week on positive note

• Liquidity returns back to money markets

By Wealth Trust Securities The sentiment in secondary bond markets closed the week ending 13 February on a positive note as buying interest towards the later part of the week was witnessed on expectations of a sovereign bond issue by the Government of Sri Lanka in the near future. However, this was subsequently to rates increasing during the first half of the week due to weighted averages at the weekly auction increasing to a 20 week high. Activity continued to surround the two three year maturities (i.e. 01.04.2018 and 15.08.2018) followed by the seven year maturity of 01.07.2022. Yields on these maturities were seen increasing to weekly highs of 7.17%, 7.22% and 7.73% respectively before edging down once again to close the week at 7.10/13, 7.14/18 and 7.68/70. Furthermore, the shorter tenure two year maturity was seen changing hands within a weekly high of 7.10% to a low of 7.02% while the six and nine year maturities of 01.05.2021 and 01.01.2024 witnessed trades within 7.63% to 7.72% and 8.13% to 8.15% respectively. In money markets, the rationalisation of accessing the standing deposit facility of 6.50% by most market participants during the first week of a calendar month, the limit on dollar/rupee swaps to two cents per day coupled with the decrease in the average surplus liquidity to Rs. 19.01 billion during the week ending 13 February against its previous weeks average of Rs. 22.82 billion saw overnight call money and repo rates increase considerably during the week to average 6.42% and 6.23% respectively in comparison to its previous weeks averages of 6.04% and 5.82%. However, rates was seen easing off on Friday due to liquidity increasing to Rs. 54.64 billion with the Open Market Operations (OMO) Department of Central Bank mopping up an total amount of Rs. 26.75 billion by way of two term repo auctions at weighted averages of 5.92% for seven days and 6.00% for 76 days respectively.     Active two-way quotes on spot contracts resume during the week The limitation on forward premiums to two cents per day saw active two way quotes on spot contracts resume during the week to close the week at Rs. 132.80. This intern saw the quotes on spot next and spot next-next contacts appreciate to Rs. 132.82 and Rs. 132.84/04 respectively, though market activity decreased during the week. The daily USD/LKR average traded volume for the first four trading days of the week stood at $ 31.60 million. Some of the forward dollar rates that prevailed in the market were 1 month – 133.43; 3 months – 134.43 and 6 months – 135.85.