Market liquidity remains at shortage despite CBSL injecting term funds

By Wealth Trust Securities

The open market operations (OMO) department of the central bank conducted a reverse repo auction for the second consecutive day. An amount of Rs 3 Bn was injected to the system at a weighted average of 9.72% as overnight call money and repo rates remained steady.

However, a further amount of Rs 1.26 Bn was accessed through its reverse repo window at rate of 9.75%, while an amount of Rs 0.35 Bn was deposited at the central bank repo window at a rate of 7.75%. This in turn resulted in an overnight liquidity shortage of Rs 3.9 Bn, up from Friday’s short of Rs.1.54 billion.

In line with this, the upward trend in secondary market yields experienced during later part of Friday, fuelled by the monthly inflation announcement which increased contrary to market expectations, continued due to selling interest, mainly on the five year and six year maturities. The six year maturity reflected the steepest increase of 15 bps to an intraday high of 12.95% while the five year bond picked up by 10 bps to a high of 12.45%. In addition the 3 year maturity traded within the range of 12.30% - 12.40%.

Rupee appreciates further

The rupee continued to appreciate for a second consecutive day to go below the psychological barrier of Rs 130 once again to hit an intraday high of Rs 129.20. The total dollar/rupee volume for the previous day (30/11/12) was US $ 59.70 million.