Change in momentum sees selling interest in secondary bond markets

Monday, 18 February 2013 00:00 - - {{hitsCtrl.values.hits}}

The announcement of authorities deciding not to pursue a new IMF funding program on the day when Central Bank kept its policy rates unchanged for the second consecutive month was seen creating doubts with market participants as some market participants were showing interest in reducing their duration by selling the longer leg of the yield curve and buying the shorter leg according to market sources.

However, Weighted Averages (WAvg) on both the Treasury bond and bill auctions dipped during the week.

Accordingly the WAvg on the five year Treasury bond, dipped by one basis point while the WAvg’s on the 91 day bill, 182 bill and 364 day bill dipped by 15 basis point, eight basis points and one basis points respectively.The two liquid five year maturities (15.08.2018 and 01.04.2018) increased from weekly lows of 10.85% at the beginning of the week to a weekly high of 11.00% and closed the week at 10.90%.

Furthermore, the six year bond increased to a weekly high of 11.60% from its opening level of 11.45% as selling pressure was witnessed on the longer leg of the yield curve.

In secondary market bills, the 364 day bill was seen changing hands within the range of 11.05% to 11.08%.

Meanwhile, in money markets, a high amount of volatility was witnessed on surplus liquidity during the week from a low of Rs. 19.81 billion to a high of Rs. 45.39 billion.

However, in an effort to drain out liquidity on a more permanent basis which is inflationary in nature a total amount of Rs. 11.85 billion was mopped up from the system for tenures ranging from 15 days to 29 days by way of outright sales of Treasury bills conducted by the Open Market Operations (OMO) department of Central bank.

This intern saw overnight call money and repo rates average 9.54% and 8.63% respectively for the week.

The rupee depreciated during the week against its last week’s closing levels of Rs. 126.28 to a two week low of Rs. 125.72 yesterday on the back of continued importer demand.

The total USD/LKR traded volume for the previous day stood at US$ 53.00 million. Given below are some forward Dollar rates that prevailed in the market, one month 127.55; three months 129.38 and six months 132.05