Market’s positive momentum reversed

• Yield curve witnesses a parallel shift upwards
• Foreign holding in rupee bonds increases for second consecutive week

By Wealth Trust Securities

The secondary bond market yields increased gradually during the week ending 10 March reversing the positive momentum witnessed over the previous week. 

The continued rise in weighted averages at the weekly Treasury bill auctions reflecting its fifth consecutive week of increases to four year highs of 9.47% and 10.39% respectively on the 91 day and 182 day maturities coupled with renewed selling interest were seen as the reasons that negated the positive momentum which prevailed in the market during the previous week. 

In the secondary market, yields of the liquid maturities of 01.05.20, 01.08.24 and 01.08.26 increased to weekly highs of 13.10%, 13.15% and 13.22% respectively against its previous weeks closing levels of 12.60/80 and 13.00/10 each with average volumes changing hands while two way quotes on the rest of the curve were seen increasing as well leading to a parallel shift upwards. 

Meanwhile the foreign component in Rupee bonds was seen increasing for a second consecutive week to record an inflow of Rs.1.8 billion for the week ending 8 March. This was ahead of today’s (13) bond auctions, at where Rs.20 billion in total will be on offer consisting of Rs.12.5 billion on a 1.10 year maturity of 15.01.2019 and a further Rs.7.5 billion on a 7.05 year maturity of 01.08.2024. 

In money markets, the overnight repo rate decreased further during the week to average 8.58% against its previous week’s average of 8.66% as the net liquidity shortfall in the system decreased further to Rs.13.21 billion, against its previous week’s average of Rs.27.82 billion. The OMO (Open Market Operation) Department of Central Bank continued to infuse liquidity throughout the week on an overnight basis at weighted averages of 8.50% while the average overnight call money rate for the week stood at 8.50%. 

Rupee dips during the week   

The USD/LKR rate on active two weeks and one month forward contracts lost ground during the week on the back of seasonal importer demand and a strengthening dollar internationally to close the week at Rs.152.35/40 and Rs.153.05/15 respectively in comparison to its last week’s closing levels of Rs.151.70/85 and Rs.152.35/50.  The daily USD/LKR average traded volume for the first four days of the week stood at $ 62.22 million.  Given are some forward dollar rates that prevailed in the market: three months – 154.85/00; six months – 157.45/60.