Money market liquidity expected to increase further this week

The announcement of a term repo auction for an amount of Rs. 20 billion, an Open Market Operations (OMO) tool used to drain out excess liquidity was a sign of liquidity increasing in money markets this week.

This could be following a bond maturity due on 15 January 2013 for an amount of Rs. 72.9 billion. However all bids at the auction was rejected.

Wealth Trust Securities said the secondary bond market remained very active during last week with the five year maturity (15-08-18) remaining the favourite duration as its yield hit a weekly low of 10.30% subsequent to the Treasury bond auction held on 10 January.

However profit taking towards the latter part of the week saw yields increasing to 10.95% and closed the week at 10.75%-10.80% as buying interest at these levels was witnessed once again.

Furthermore the auction bond of five years (1 April 2018) was seen been traded at a low of 10.50% on the day of the auction and move up subsequently to levels of 11.02% to 11.05%, higher than its weighted average of 10.90% and reflecting a premium of 20 to 25 basis points above the 15 August 2018 maturity. The yield curve continued to remain erratic as shorter tenure durations was seen been quoted above the longer tenure ones.

Wealth Trust also said concerns over money market liquidity eased off further as surplus liquidity increased towards the latter part of last week to close at Rs. 9.70 billion. This in turn saw overnight call money and repo rates edged down marginally to average 9.82% and 8.88% respectively for the week.  

The rupee meanwhile gained to a weekly high of Rs. 125.90 on foreign purchases in to rupee bonds and a decline in forward dollar premiums. However buying interest at these levels saw the dollar gain marginally to close the week at levels of Rs. 126.15/25.

The total dollar/rupee volume for the previous day (10 January 2013) was US$ 56.54 million. Some of the forward dollar rates that prevailed in the market were one month – 127.15; three months – 128.73; and six months – 131.05.