Foreign buying in rupee bonds gathers momentum

 By Wealth Trust Securities

The bullish sentiment that ignited in secondary bond markets towards the latter part of the week ending 1 April was seen continuing during the week ending 8 April as well, with yields declining on the back of considerable foreign and local buying interest. 

The short end of the yield curve consisting of the 15.08.2018, 01.05.2020 and 01.08.2021 maturities recorded the sharpest declines of 60 basis points (bp), 65 bp and 75 bp respectively week on week to weekly lows of 10.75%, 11.35% and 11.40% while the maturities of 15.03.2025 and 01.06.2026 on the belly end of the curve dipped by 50 bp each week on week to weekly lows of 11.99% and 12.05% respectively. 

Activity on the long end of the curve centred the 15.05.2030 maturity, as it was seen dipping to a weekly low of 12.40%  recording a week on week drop of 35 bp which led to an parallel shift downwards of the overall yield curve for the first time in nine weeks.  

Meanwhile foreign buying in rupee bonds was seen gathering pace as the inflow for the week ending 06th April 2016 was at Rs. 2 billion against its previous week figure of Rs. 1.10 billion. Furthermore, the weekly Treasury bill auction for the week ending 15 April will be conducted on Monday 11 April due to a shortened trading week, at where a total amount of Rs. 23 billion will be on offer consisting of Rs. 9.0 billion each on the 91 day and 182 day maturities and Rs. 5.0 billion on the market favourite 364 day maturity. At last week’s auction, the weighted averages declined across the board for the first time in eighteen weeks reversing an upward trend witnessed previously. 

Meanwhile in money markets, overnight Call money and Repo rates increased marginally to average 8.15% and 8.12% respectively for the week as average liquidity in money market stood at a net deficit of Rs. 34.14 billion. Liquidity was continuously infused during the week by way of overnight Reverse repo auctions at weighted averages of 7.97% to 8.00% by the Open Market Operations (OMO) department of Central Bank. 

Rupee appreciates during the week

The rupee on spot next contracts was seen appreciating during the week to close the week ending 8 April at Rs. 144.90/20 against its previous weeks closing level of Rs. 146.30.50 on the back of foreign buying in rupee bonds and inward remittances ahead of the holiday season. The daily USD/LKR average traded volume for the first four days of the week stood at $ 72.16 million. 

Some of the forward dollar rates that prevailed in the market were one month – 145.80/10, three months – 147.55/85 and six months – 149.80/10.