Five-year bond yield crosses 12.00% psychological level

By Wealth Trust Securities

Continued selling interest across the yield curve during the week ending 18 March saw secondary market bond yields increasing for a ninth consecutive week. 

This sentiment was also reflected in the primary bond auction where the weighted averages increased considerably in comparison to the previous auction. All bids for treasury bills at the weekly primary auction were rejected for the second consecutive week. 

A significant aspect witnessed during the week was that of the benchmark five-year bond maturity crossing the psychological level of 12.00% since 2012, with the 01.08.21 trading at 12.10%. Furthermore, the liquid maturities of 01.09.23 and 01.01.24 were seen changing hands within the range of 12.00% to 12.15% and 12.10% to 12.32% respectively in comparison to its opening levels of 12.00/10 and 12.00/15. 

The yields of the 2017 and 2018 maturities too moved up with trades taking place at levels of 10.00% to 10.15% and 11.00% to 11.20% respectively, reflecting a parallel shift upward of the overall yield curve. 

In the meantime, foreign holding of Rupee bonds continued to dip recording an outflow of Rs. 9.5 billion for the week ending 16 March. 

In the money market, overnight call money and repo rates remained high at levels of 7.75% to 7.95% and 7.55% to 8.50% respectively, with surplus liquidity seesawing from a deficit of Rs. 8.00 billion to a high of Rs. 26.5 billion. The Central Bank’s Standard Lending Facility Rate (SLFR) of 8.00% was accessed throughout the week. 

Rupee depreciates further 

The rupee on active one week forward contracts depreciated considerably during the week to close the week at Rs. 145.60/75 against its previous week’s closing of Rs. 145.15/25 on the back of importer demand. The daily USD/LKR average traded volume during the first four days of the week stood at $ 78.11 million. 

Some of the forward dollar rates that prevailed in the market were one month - 146.45/55; three months - 147.95/15 and six months - 149.90/40.