OMO auctions recommence in order to mop up liquidity
Friday, 3 October 2014 05:21
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Secondary market bond yields increase for second consecutive day
By Wealth Trust Securities
As liquidity in money markets was expected to increase further today due to the unrolled bill maturity and term repo maturities, the Open Market Operations (OMO) department of Central Bank was seen recommencing its overnight and term repo auctions yesterday for the first time since 23 September in order to mop up liquidity.
In line with this, Rs. 75.45 billion was drained out in total by way of three term repo auction for 35 days, 56 days and 77 days at weighted averages of 6.03%, 6.07% and 6.08% respectively in addition to Rs. 27.78 b being drained on an overnight basis at a weighted average of 6.00%. Surplus liquidity stood at Rs. 93.04 b yesterday as call money and repo rates were seen averaging 5.73% and 5.68% respectively.
Driven by the impact of the recommencement of the OMO auctions, secondary market bond yields were seen increasing for a second consecutive day yesterday as activity remained high across the yield curve once again.
The three year maturity of 15 May 2017 was seen increasing to an daily high of 6.80% against its previous day’s closing level of 6.35%, the two four year maturities (i.e. 1 April 2018 and 15 August 2018) to highs of 6.85% and 6.90% respectively against its previous days closings of 6.60% and 6.70%, the five year maturity of 1 July 2019 to an high of 6.95% against 6.75%, the seven year maturity of 1 May 2021 to 7.25% against 7.10%, the eight year maturity of 1 July 2022 to 7.55% against 7.30% and the nine and a half year maturity of 1 January 2024 to 7.70% against 7.60%.
In addition, the two 15-year maturities (i.e. 1 January 2029 and 1 May 2029) were seen changing hands within the range of 8.50% to 8.65% as well. However, buying interest at these levels saw yields dip marginally once again during evening hours of trading.
Rupee gains for a second consecutive day
Meanwhile in dollar/rupee markets yesterday, the USD/LKR rate appreciated for a second consecutive day to close the day at Rs. 130.30/50 against its previous day’s closing of Rs. 130.50/70 on the back of export conversions and foreign buying in to equity and government securities markets. The total USD/LKR traded volume for 1 October was at $ 54.25 million.
Some of the forward dollar rates that prevailed in the market were: one month – 130.73; three months – 131.30; and six months – 132.30.
