Downward trend in bond yields continues ahead of weekly bill auction

Wednesday, 17 September 2014 01:40 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities The yields in secondary bond markets dipped further yesterday ahead of this week’s Treasury bill auction. Buying interest mainly fuelled by the second quarter GDP growth number of 7.8% was witnessed across the yield curve from the three year maturity of 15 May 2017, the two four year maturities (1 April 2018 and 15 August 2018), the five year maturity of 1 July 2019 and the eight year maturity of 1 July 2022 as its yields were seen hitting intraday lows of 6.85%, 7.13%, 7.20%, 7.40% and 8.07% respectively against its days opening highs of 6.95%, 7.17%, 7.25%, 7.45% and 8.15%. Furthermore buying interest on secondary market Treasury bills saw October 2014 bills quoted within the range of 6.17% to 6.22% and July 2015 bills within 6.25% to 6.30%. Today’s bill auction will have on offer a total amount of Rs. 5 billion with Rs. 0.5 b on the 91 day maturity, Rs. 1.5 b on the 182 day maturity and Rs. 3 b on the 364 day maturity. At last week’s auction, weighted averages dipped by one basis point each on the 91 day, 182 day and 364 day maturities to 6.18%, 6.27% and 6.29% respectively. Meanwhile in money markets, overnight call money and repo rates remained steady to average 6.70% and 6.51% respectively as surplus liquidity in the market stood at Rs. 26.69 billion yesterday. The full amount was deposited at Central Bank’s Standing Deposit Facility Rate (SDFR) of 6.50% as no auctions under its Open Market Operations (OMO) were conducted for a second consecutive day. Rupee remains steady In Forex markets, the USD/LKR rate on spot contracts remained steady to close the day at levels of Rs. 130.28/30 as markets continued to be at equilibrium. The total USD/LKR traded volume for 15 September was at $ 40.15 million. Some of the forward dollar rates that prevailed in the market were: one month – 130.83; three months – 131.49; and six months – 132.59.

Bourse rebounds

Reuters: Stocks ended steady on Tuesday after the market surrendered early gains, as investors booked profits mainly in diversified and financial stocks in an overbought market, while some select stocks like Sri Lanka Telecom Plc outperformed the Bourse. The main stock index edged up 0.02%, or 1.13 points, to 7,176.10. The Bourse hit its highest close since 10 June 2011 of 7,218.68 on Friday. “Because of the profit-taking during the latter part of the day, the index ended flat. We have seen some profit-taking in overheated counters,” said Dimantha Mathew, Manager Research at First Capital Equities Ltd. Brokers said the market would continue its bullish run with foreign buying, low interest rates and good earnings expectations, despite profit-taking in some counters. The index has gained 21.37% so far this year. The Bourse has been in an overbought region since July. The Relative Strength Index, a momentum indicator tracked by chartists, rose to 80.121 on Tuesday compared with Monday’s 78.972, Thomson Reuters data showed. Stocks are deemed “overbought” above the 70-mark, signalling a reversal in the near term. Shares in Sri Lanka’s leading fixed line telephone operator Sri Lanka Telecom Plc, which led the overall gain in the index, rose 2.64% during the day but ended flat at Rs. 53.10 a share. The day’s turnover was Rs. 2.06 billion ($15.81 million), more than this year’s daily average of Rs. 1.25 billion. Foreign investors were net buyers of Rs. 116.4 million worth of shares on Tuesday, extending the year to date net foreign buyers of Rs. 10.34 billion.

Rupee ends weaker, but State banks cap fall

Reuters: The rupee ended weaker on Tuesday as sustained demand by importers during the latter part of the day outpaced remittances and dollar sales by exporters, forcing dealers to trade in forwards, even as dollar selling by State-run banks capped any further fall, dealers said. The rupee ended at 130.31/40 per dollar compared with Monday’s close of 130.27/29. On Friday, the rupee had closed at 130.29/31, the lowest since 21 July. Dealers said one of the two State-owned banks that the Central Bank regularly taps to stem volatility in the currency sold dollars in the spot market at 130.28 for select trades. The limit forced dealers to trade in forwards before the three-day forwards, or spot next, too was capped at 130.32 rupees by the banks. The spot next closed at 130.32/38 per dollar compared to Monday’s close of 130.29/31. “The import pressure is being controlled by the state banks,” said a currency dealer, asking not to be named. Foreign investors bought a net Rs. 3.2 billion ($ 24.57 million) worth of Government securities in the week ended 10 September, official data showed.