Marginal steepening of the yield curve witnessed during the week

By Wealth Trust Securities 

The yield curve witnessed a marginal steepening during the week ending 8 May in comparison to its previous week, as yields on the shorter end to the belly end of the yield curve continued to dip while yields on the longer end edged up marginally. 

The outcome of the weekly Treasury bill auction, where weighted averages continued to decline to a ten-week low, led to yields on the shorter end to the belly end of the curve dipping. However, the outcome of the 5-year Treasury bond auction, which fetched a weighted average of 8.46% and the announcement of two further auctions for a total amount of Rs. 10 billion, due this week, saw yields on the longer end of the curve move up marginally. Activity was seen moderating during the week as it centered on the liquid maturities of 15.05.2017, 01.06.2018, 15.09.2019, 01.06.2020, 01.09.2023 and15.03.2025 within weekly lows of 7.15%, 7.91%, 8.16%, 8.40%, 8.72% and 8.95% respectively against its weeks opening highs of 7.25%, 8.00%, 8.25%, 8.46%, 8.80% and 9.00%. 

Nevertheless, in secondary bill markets, continued demand saw August and November 2015 bills changing hands within the range of 6.00% to 6.05% and 6.12% to 6.15% respectively post-auction. 

In money markets, overnight call money and repo rates remained steady during the week ending 8 May to average 6.12% and 6.02% respectively as surplus liquidity remained high to average Rs. 124.02 billion.

 Rupee fluctuates 

during the week

 In Forex markets, importer demand during the early part of the week saw the USD/LKR rate on spot and two-month forward contracts depreciate to Rs. 133.30 and Rs. 135.70/80 respectively. However, export conversion towards the later part of the week saw the one-month and two-month forward contracts appreciate once again to close the week at Rs. 134.70/85 and Rs. 135.40/55 respectively. The daily average USD/LKR traded volume for the first three trading days of the week stood at $ 51.87 million. 

Some of the forward dollar rates that prevailed in the market were 3 months - 136.00 and 6 months -137.65.

Given below are the closing, secondary market yields for the most frequently traded maturities,