Bullish momentum continues in bond markets as money market rates hit 21-month low
Monday, 14 October 2013 00:00
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By Wealth Trust Securities
The positive momentum in bonds markets remained during the week with the yield curve reflecting a parallel shift downwards for a fifth consecutive week. The drop in the overnight call money and repo rate averages to a 21-month low of 7.63% and 8.36% during the week added further momentum toward the bullish run.
Surplus liquidity in money markets increased during the week as well to close the week at Rs. 25.5 billion against its weeks opening level of Rs. 15.75 b. However the Open Market Operations (OMO) department of Central Bank was seen mopping up liquidity throughout the week for durations of six to seven days at a steady weighted average of 7.93%.
In secondary bond markets, activity continued to remain very high during the week with the liquid five year maturity been the pick of the yield curve followed closely by the three and a quarter year maturity. These two maturities were seen dropping as much as 32 basis points (bp) and 34 bp respectively during the week to a near two month low of 11.33% and 11.13% but closed the week marginally higher against its lows at levels of 11.36/38 and 11.20/25 on profit taking. In addition, the two year maturities were seen changing hands within a weekly low of 10.68% to a high of 10.85%.
Similarly to bond market, heavy activity was witnessed on secondary market bills as well with January 2014 bills changing hands within the range of 8.80% to 9.00% during the week, May 2014 within 9.75% to 9.95%, June 2014 within 10.05% to 10.15%, August 2014 within 10.20% to 10.30% while the 364 day bill was seen closing the week at 10.43/47 subsequent to changing hands at 10.45%.
Meanwhile, the total offered amount for this week’s bill auction was reduced to nine billion in comparison to its previous week’s amount of Rs. 8 b, with the auction scheduled for today, 14 October, due to a shortened week.
Rupee closes the week marginally higher
The USD/LKR rate closed the week marginally higher at Rs. 131.07/10 against its previous week’s close of Rs. 131.15/18 on the back of selling interest on forward dollar contracts and export conversions outweighing importer demand. The daily USD/LKR average traded volume for the first four days of this week stood at US$ 48.00 million.
Some of the forward dollar rates that prevailed in the market were one month – 132.00; three months – 133.64; and six months – 136.09.
