Bullish sentiment sees primary auction yields dip further

By Wealth Trust Securities

The positive sentiment in markets with regard to the outlook on interest rates over the medium term saw weighted averages (WAvg) at yesterday’s weekly Treasury bill auction dip for a fifth consecutive week. The 91-day and 182-day WAvg’s dipped by two basis points (bp) each while the 364-day bill reflected a dip of four bp. The market favourite 364-day bill continued to dominate the auction as it represented 75% of the total accepted amount.

Activity in secondary bond markets continued to remain high yesterday as yields dipped marginally subsequent to the announcement of auction results with the two liquid five-year maturities (i.e. 1 April 2018 and 15 August 2018) reflecting the highest amount of activity as it closed the day at levels of 11.32/36 and 11.40/42 respectively. Furthermore the four-year maturity was seen changing hands within the range of 11.10% to 11.15% as well. Demand for the 364 day bill subsequent to the auction saw trades taking place with the range of 11.18% to 11.20% in secondary markets.

The Open Market Operations (OMO) department of Central Bank mopped up an amount of Rs. 5 b from the system on an overnight basis by way of a Repo auction at a weighted average of 8.29% as surplus liquidity in money markets on an overnight basis stood at Rs. 5.39 billion yesterday. Interestingly an amount of Rs. 1.51 b was accessed from CBSL’s discount window of 9.50% for a fourth consecutive day while an amount of Rs. 1.9 b was deposited at CBSL’s repo window of 7.50%. However the averages on overnight call money and repo rates remained mostly unchanged at 9.52% and 8.75% respectively.

Rupee continues positive trend

In Forex markets, the rupee appreciated further by around 25 cents yesterday to close the day at Rs 126.05/10 in comparison to its previous day’s closing level of Rs. 126.30/35. The total USD/LKR volume for the previous day stood at US$ 98.45 million. Given are some forward dollar rates that prevailed in the market: one month – 127.19; three months – 128.69; six months – 131.19.