Bond yields dip marginally following policy announcement

Wednesday, 28 January 2015 00:00 - - {{hitsCtrl.values.hits}}

Sri Lanka plans for first sovereign dollar bond issue for 2015

By Wealth Trust Securities In secondary bond markets, yields were seen dipping marginally yesterday following the monitory policy announcement by Central Bank for the month of January at where policy rates were held steady for a twelfth consecutive month. Buying interest on the 15.05.2017, the two 2018’s (i.e. 01.04.2018 and 15.08.2018), the 01.07.2019 and the 01.05.2021 maturities saw its yields dip to intraday lows of 6.98%, 7.10%, 7.12%, 7.15% and 7.55% respectively as two way quotes were seen narrowing down. In addition, a limited amount of activity was witnessed on the 01.07.2022 maturity as well within the range of 7.63% to 7.65%. Furthermore, the intention by part of the Central Bank to tap international markets during the month of February for a sovereign dollar bond issue was seen adding further momentum to the buying concentration. Meanwhile at today’s bill auction, a total amount of Rs. 10 billion will be on offer with Rs. 2 billion on the 91 day, Rs. 3 billion on the 182 day and Rs. 5 billion on the 364 day maturities. At last week’s auction, weighted averages increased by 01 basis point across the board to 5.80%, 5.90% and 6.05% respectively on all three durations. In money markets, overnight call money and repo rates increased marginally to average 5.87% and 5.21% respectively as surplus liquidity decreased further to Rs. 11.77 billion yesterday. Two-way quotes widen further in rupee markets The rupee on spot next contracts (three day forwards) was seen closing the day at Rs. 131.00/30 against its previous day’s closing of Rs. 133.00/15 while spot next-next contracts were seen closing the day at Rs. 133.20/60. The total USD/LKR traded volume for 26 January 2015 was $ 72.35 million. Some of the forward USD/LKR rates that prevailed in the market were 1 month - 133.55; 3 months -134.50 and 6 months - 135.85.

Rupee forwards end weaker on importer dollar demand; seen falling

Reuters: Rupee forwards ended weaker on Tuesday on importer dollar demand even as the Central Bank capped the fall, while exporters awaited direction from the supplementary Budget later this week, dealers said. Fears of possible depreciation kept exporters away from the market, which resulted in the fall of the currency, leading the central bank to cap the four-day forward at 133, which forced dealers to trade one-week forwards, dealers said. One-week forwards closed at 133.45/55 per dollar, weaker from Monday’s close of 133.20/40. Four-day forwards closed at 133.00/133.50 per dollar, weaker from Monday’s close of 133.00/133.20. They fell 0.45% last week, market data showed. “No dollars are coming into the market as exporters are waiting, expecting more depreciation in the currency,” a dealer said. Another dealer said concerns over the central bank and the market not agreeing on the price of the currency have weighed on sentiment. Dealers said the market is expecting depreciation in the short term with the widening trade balance and in line with global currencies. The spot currency has not been trading, while forwards have been trading with downward pressure, dealers said. The new Central Bank Governor, Arjuna Mahendran, told Reuters that the current foreign exchange policy does not need “any big changes.” “That will stabilise now. I don’t think that will continue,” Mahendran said, referring to the depreciation trend since August. Some dealers said exporters are waiting for clarity from the new Government’s economic policy as they are confused after the Central Bank Governor kept rates steady on Tuesday, saying the economy was doing well, but the finance minister criticised the previous Government’s economic management., Finance Minister Ravi Karunanayake will present a supplementary Budget on Thursday, aiming to fulfil election pledges by President Maithripala Sirisena that included pay hikes for the state sector and price reductions on essential goods. The market had been expecting a flexible exchange rate with more foreign grants under the new Government as opposed to the controlled exchange rate regime earlier.