Bond markets witnesses mixed fortunes amidst heavy volatility

Tuesday, 7 October 2014 00:32 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities The rejection of the weekly Treasury bill auction for the first time in nearly three years and the recommencement of Open Market Operations (OMO) by the OMO department of Central Bank saw secondary market bond yields witness heavy volatility during the week ending 03rd October. Yields were seen declining across the yield curve during the early part of the week on expectations of the outcome of the weekly Treasury bill auction with the liquid maturities of the two 2018’s (i.e. 15.08.2018 and 01.04.2018), the 01.07.2019, the 01.05.2021, the 01.07.2022 and the 01.01.2024 dipping to weekly lows of 6.30%, 6.35%, 6.43%, 6.95%, 7.07% and 7.38% respectively. However, the outcome of the OMO auctions saw yields spike during mid-week to hit highs of 6.90%, 6.95%, 7.00%, 7.20%, 7.55% and 7.70% respectively due to the uncertainty in markets. Nevertheless, yields were seen dipping once again towards the latter part of the week on the back of fresh buying interest due to the cancelation of this week’s Treasury bill auction and the outcome of the seven day OMO auction at where an amount of Rs 20.00 billion was drained at a lower weighted average of 5.89%.

Meanwhile in money markets, overnight call money and repo rates decreased sharply to average 5.88% and 5.82% for the week as surplus liquidity increased to average Rs. 78.24 billion against its previous weeks average of Rs 50.81 Bn. 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 5.89% to 6.08%.

Rupee fluctuates during the week In dollar/rupee markets, the USD/LKR rate depreciated during the start of the week mainly on spot next contracts to a weekly low of Rs 131.05 on the back of importer demand and foreign outflows in equity and government securities. However, export conversion coupled with equity inflows towards the latter part of the week saw the rupee gain most of its lost ground to close the week at Rs 130.35/45 once again. The daily average USD/LKR traded volume for the first four trading days of the week ending 03rd October was at US $ 86.77 million. Some of the closing forward dollar rates that prevailed in the market were 1 Month - 130.82; 3 Months - 131.46 and 6 Months - 132.44.