Liquidity falls during the week to net deficit of Rs. 2.78 b

Monday, 29 July 2013 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities

The week reflected a decline in excess liquidity that flooded the system at the beginning of this month (1 July) to the tune of Rs. 35.06 billion, following a cut in the SRR ration from a deficit of Rs. 9.19 billion recorded at the end of last month (28 June) to close the week ending 26 July at a net deficit of Rs. 2.78 billion. The retirement of the Central Bank’s holdings in Government securities along with non-sterilised dollar sales into the system were seen as the reasons for the decline in liquidity according to market sources. This in turn pushed up the weekly averages on overnight call money and repo rates to 8.77% and 8.25% respectively in comparison to its last week’s averages of 8.71% and 8.11%. Despite liquidity turning negative during the week, the weighted average on the 364-day bill declined further by 3 basis points to 10.56% at its weekly Treasury bill auction and recorded a total deduction of 79 basis points over past 16 auctions. However, all bids for the benchmark 91-day and 182-day bills were rejected for the first time in 33 and 16 weeks respectively as well. In secondary bond markets, activity remained rather dull during the first half of the week and picked up towards the latter part of the week as yields reflected a marginal downward trend. Accordingly, a majority of activity was witnessed on the two liquid five year maturities (i.e. 1.4.2018 and 15.8.2018) from weekly highs of 11.28% and

11.36% respectively at the beginning of the week to lows of 11.24% and 11.31% towards the latter part of the week while the three year maturity closed the week lower at 10.90/92 as well in comparison to its weeks opening level of 11.00%. Furthermore, buying interest on secondary market bills continued during the week, with the 364 day bill changing hands within the range of 10.50%-10.55%. Rupee drops marginally during the week The rupee lost ground marginally during the week to close the week at Rs. 131.60/65 in comparison to its previous weeks closing levels of Rs. 131.50/60. Meanwhile, spot next contracts were seen trading at levels of Rs. 131.60 to 131.73 during the week and closed the week at Rs 131.65/70 in comparison to its last week’s closing levels of Rs 131.60/65 as well. The daily average USD/LKR traded volume for the first three days of the week was at US$ 72.54 million. Some of the forward dollar rates that prevailed in the market were one month – 132.53; three months – 134.03 and six months – 136.13.