Parallel shift downwards of overall yield curve for sixth consecutive week

Monday, 13 January 2014 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities The downward trend in secondary market bond and bill yields witnessed over the past five weeks continued throughout the week ending 10 January as well with the start of the week witnessing the successful launch and pricing of a Sri Lankan dollar denominated sovereign bond issue for $ 1 billion at 6% for a period of five years. This was followed by weight averages (WAvg’s) at the weekly Treasury bill auction dipping for a 16th consecutive week to record 7%, 7.20% and 7.42% respectively on the 91-day, 182-day and 364-day maturities.

A majority of activity continued to be on the liquid two 2018 maturities (i.e. 15.08.2018 and 01.04.2018) closely followed by the 01.07.2019 maturity as it was seen changing hands within weekly highs of 8.90%, 8.95% & 9.25% respectively to lows of 8.63%, 8.70% & 8.75%. Meanwhile the first bond auction conducted for the year and the first in two months drew considerable interest recording impressive WAvg’s of 8.65% and 10.61% for durations of 5 years and 6-months and 15 years respectively. However more interestingly, secondary market yields on the auctioned 2019 maturity were seen closing the week well above its WAvg’s, at levels of 8.80/90 while the 2018 maturities were trading above as well to close the week at levels of 8.70/72 and 8.76/79. Continued buying interest in secondary market bills saw the 364-day bill change hands within the range of 7.23% to 7.35% post auction while durations centering the 182-day were seen changing hands within the range of 9.95% to 7.10%.

Meanwhile in money markets, Overnight call money and repo rates dipped during the week to average 7.44% and 6.85% respectively as average surplus liquidity in the system increased to Rs. 56.28 billion against its last week’s average of Rs. 38.67 billion.

Rupee gains marginally during the week The rupee closed the week marginally higher at Rs. 130.68/72 against its previous weeks closing of Rs. 130.70/75 subsequent to dipping to a weekly low of Rs. 130.80 on the back of foreign selling on rupee bonds according to market sources. The daily average USD/LKR traded volume for the first four days of the week was at $ 59.73 million. Some of the forward dollar rates that prevailed in the market were 1-Month: Rs. 131.05; 3-Months: Rs. 131.65 and 6-Months: Rs. 132.85.