Buying interest keeps secondary market Treasury yields flat

Buying interest towards the latter part of the week, mainly on the five-year bond, kept secondary market Treasury yields flat even as the weighted averages on the weekly Treasury bill auction increased across the board by 2 bp, 7 bp and 8 bp respectively on the 91-day, 182-day and 364-day bills to levels of 10.68%, 11.97% and 12.56%.

The deceleration in inflation on the point to point basis for the month of October which was against market expectations coupled with the third successful term reverse repo auction conducted by the Open Market Operations (OMO) department of Central Bank, where it injected an amount of Rs. 8 b at a weighted average of 9.86% for a period 31 days was seen as the reasons that negated the upward trend in yields according to market sources.

Volumes traded were rather moderate on bonds as trades were seen taking place within a thin band of 10 basis points on the more liquid three-year, five-year and six-year maturities at levels of 12.60% to 12.70%, 12.70% to 12.80% and 13.15% to 13.25% respectively. Furthermore the wait and see approach by most market participants ahead of the upcoming Government’s annual budget reading could be another reason behind a sluggish market.

Meanwhile in money markets, overnight call money and repo rates remained steady throughout the week to average 10.54% and 9.67% respectively as market liquidity closed the week at a net deficit of Rs. 3.08 b and as any shortfall or surplus of liquidity was addressed by the OMO department.

Rupee dips during the week

The rupee lost ground throughout the week on the back of seasonal importer demand to a low of Rs. 130.40 at where it closed the week against its last week’s closing level of 129.90. Given are some forward dollar rates that prevailed in the market on Friday: one month – 130.64; three months – 133.06; and six months – 136.06.

(Source: Wealth Trust Securities Ltd)