Bullish trend continues in secondary bond markets ahead of weekly auction

Wednesday, 4 December 2013 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities The downward movement on bond yields witnessed in secondary bond markets driven by speculations of the outcome of the monitory policy meeting for the month of December as well as market expectation of the downward trend in weighted averages (WAvgs) at today’s primary auction continued yesterday as well. Activity remained high with trades seen taking place on durations ranging from two years to five years. Buying interest was witnessed across these maturities with a bulk of the activity taking place on the liquid two five year maturities (i.e. 1 April 2018 and 15 August 2018) followed by the three and a quarter year (1 January 2017) and the two and a half year (1 April 2016) as its yields were seen hitting yearly lows of 10.74%, 10.80%, 10.27% and 10.08% respectively against its previous day’s closing levels of 10.87/90, 10.98/00, 10.45/48 and 10.16/20. Meanwhile in secondary bill markets, continued demand saw January 2014 bills change hands within the range of 7.95% to 8.05%, May 2014 within 8.45% to 8.55%, August 2014 within 8.95% to 9.05% and the latest one year within the range of 9.44% to 9.55%. Today’s weekly Treasury bill auction will have on offer an total amount of Rs. 10 b, consisting of Rs. 0.5 b on the 91 day bill, Rs. 1 b on the 182 day bill and Rs. 9.5 b on the 364 day bill. At last week’s auction, WAvgs declined for a 10th consecutive week to 8.06%, 8.80% and 9.69% respectively. In money markets, surplus liquidity was at Rs. 29.44 b yesterday as an amount of Rs. 14.55 b was mopped up from the system on a seven day basis by way of a Repo auction conducted by the Open Market Operations (OMO) department of the Central Bank at a WAvg of 7.44% while a further Rs. 14.89 b was deposited at its Repo window of 6.50%. Meanwhile overnight call money and repo rates continued to remain steady to average 7.78% and 7.11% respectively. Rupee gains to a one month high The rupee (USD/LKR) gained to a one month high of Rs. 130.85 in trading yesterday on the back of dollar inflows into the system and exporters cashing in on forward dollar contracts for the season ahead. The total USD/LKR traded volume for the previous day (2 December 2013) stood at US$ 30.78 million. Given are some forward dollar rates that prevailed in the market: one month – 131.65; three months – 133.13; six months – 135.18.