Bond markets trade within a narrow band during the week

Monday, 2 February 2015 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities The overall yield curve was seen closing the week and month ending 30 January broadly steady as secondary market yields were seen trading within a narrow band during a week where the Central Bank’s first monitory policy announcement for 2015 was made, plans for a sovereign dollar bond issue were highlighted and the new Government’s Interim Budget was declared. In addition, inflation for January saw its point-to-point number increase for a second consecutive month to 3.2% against its previous month’s number of 2.1% while its annualised average continued to decline for a twentieth consecutive month to 3.2% against 3.3%.

Activity during the week continued to centre the two-year maturity of 15.05.2017 within the range of 6.88% to 6.95%, the two three-year maturities (01.04.2018 and 15.08.2018) within 7.05% to 7.10% and 7.05% to 7.18% respectively, the six-year maturity of 01.05.2021 within 7.50% to 7.60%, the seven-year maturity of 01.07.2022 within 7.57% to 7.70% and the nine-year maturity of 01.01.2024 within 8.00% to 8.10% as volumes changing hands increased towards the latter part of the week.

Furthermore, the weekly Treasury bill auction for the week commencing 2 February will be conducted on Monday due to a shortened trading week. A total of Rs. 12 billion will be on offer consisting of Rs. two billion on the 91 day, Rs. 3 billion on the 182 day and Rs. 7 billion on the 364 day maturities. At last week’s auction, weighted averages were seen holding steady devoid of a movement up or down for the first time in seven weeks to record 5.80%, 5.90% and 6.05% respectively on all three maturities. Meanwhile in money markets, overnight call money and repo rates remained steady to average 5.85% and 5.20% for the week ending 30 January as the average surplus liquidity stood at Rs 16.90 billion. The Open Market Operations (OMO) Department of the Central Bank continued to mop up liquidity during the week by way of two-term repo auctions at weighted averages of 5.91% for 07 days and 5.97% for 77 days, as well as by way of outright sales of Treasury bills at weighted averages of 5.50%, 5.67% and 5.72% for maturities of 07,14 and 28 days.

Rupee dips further during the week; Activity dips Active two-way quotes were seen only on the one week forward dollar/rupee contracts to close the week at 133.50/55 as spot, spot next and spot next-next quotes were inactive on the back of continued importer demand. The daily USD/LKR average traded volume for the first four days of the week stood at US $ 67.54 million. Some of the forward dollar rates that prevailed in the market were 1 month - 133.80; 3 months - 134.50 and 6 months - 136.00.