Parallel shift downwards on the yield curve witnessed during the week

Monday, 7 October 2013 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities The downward trend in secondary market bond yields witnessed during recent weeks continued last week as well reflecting a parallel shift downwards on the yield curve, boosted by the drop on the 364-day bill weighted average (WAvg) for the first time in six weeks and the decrease in Inflation for the month of September. The liquid five year maturity was seen opening the week at levels of 11.70/75 and drop to a weekly low of 11.60% towards the latter part of the week. However, profit taking at these levels saw it close the week at 11.65/66 as activity remained very high. In addition, demand for the two-year maturity saw its yields dip to a six week low of 10.70% during the week against its weeks opening level of 11.00% while the three and a quarter year maturity was seen changing hands within a weekly low of 11.43% to a high of 11.54%. Meanwhile, secondary market bills continued to be in heavy demand pre and post auction with January 2014 bills changed hands within the range of 8.85% to 9.10%, May 2014 within 9.80% to 9.90%, August 2014 within 10.30% to 10.45%, while the 364-day bill was seen closing the week at 10.42/45.

Nevertheless during the latter part of the week, yields increased marginally overall against its weekly lows on the back of profit taking. Meanwhile in money market, surplus liquidity decreased towards the later of the week to close the week at Rs. 15.660 billion on the back of continuous mopping up as overnight call money and repo rates remained steady to average 8.43% and 8.00% for the week. Furthermore the Open Market Operations (OMO) department of Central Bank was seen mopping up liquidity only on a seven-day basis during the week at a steady weighted average of 7.95% to 7.97% Rupee appreciates during the week The rupee appreciated as much as Rs. 1.85 during the week against its last week’s closing of Rs. 132.00/05 on the back of a weakening dollar in international markets, export conversions and selling interest by banks on spot/forward dollar contracts. It was seen hitting a two and a half month high of Rs. 131.15 to close the week at Rs. 131.15/20. The daily USD/LKR average traded volume for the first four days of this week stood at $ 48.95 million. Some of the forward dollar rates that prevailed in the market were; 1-Month: Rs. 132.03, 3-Months: Rs. 133.70 and 6-Months: Rs. 136.25.