Bond markets remain bullish as inflation hits over three-and-a-half-year low

Monday, 2 June 2014 00:00 - - {{hitsCtrl.values.hits}}

Inflation on a point to point basis decreased to a 27 month low of 3.20% in May from 4.90% recorded in April while its annual average decreased to a 44 month low of 5.3% against its April figure of 5.60%.

In line with expectations and the final outcome of inflation coupled with the bond maturity of Rs. 79.2 B due on 1 June 2014, secondary market bond yields decreased marginally during the week ending 30 May on the back of considerable buying interest to close the week lower than its previous week’s closing levels as activity remained high. Once again a majority of the traded volumes during the week surrounded the two liquid 2018 maturities (i.e. 1 April 2018 and 15 August 2018) as it closed the week at levels of 8.40/42 and 8.50/51 respectively against its previous weeks closing levels of 8.45/48 and 8.55/60 subsequent to hitting weekly highs of 8.47% and 8.55% and lows of 8.40% and 8.49% respectively, closely followed by 1 July 2019 maturity as it closed the week at 8.94/95 against its previous weeks closing of 8.94/96 subsequent to trading within a weekly high of 8.95% and a low of 8.91%. In addition, late 2015 maturities, 2016 maturities and 2017 maturities were seen changing hands within the range of 7.18% to 7.22%, 7.50% to 7.55% and 7.95% to 8.05% respectively. Meanwhile in secondary bill markets, August 2014, October 2014 and May 2014 maturities were seen changing hands at levels of 6.58% to 6.62%, 6.63% to 6.68% and 6.95% to 7.00% respectively. Meanwhile in money markets, overnight call money and repo rates remained steady to average 6.94% and 6.52% for the week despite surplus liquidity fluctuating from a weekly low of Rs. 5.9 b to a high of Rs 32.7 b. The Open Market Operations (OMO) Department of Central Bank was seen mopping up liquidity during the week by way of overnight to seventy seven days term repo auctions at weighted averages ranging from 6.54% to 6.82%. Rupee closes the week stronger

The USD/LKR rate was seen closing the week stronger at Rs. 130.35/38 in comparison to its previous weeks closing of Rs. 130.45/50 subsequent to hitting an intraweek low of Rs. 130.50 on back of the strong external sector performance recorded for the month of March. The daily average USD/LKR traded volume for the first four days of the week was at $ 61.93 million. Some forward dollar rates that prevailed in the market: one month – 130.80; three months – 131.69; six months – 132.98.