Parallel shift upwards of yield curve witnessed for a second consecutive week

Monday, 10 March 2014 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities Following the outcome of the weekly Treasury bill auction at where a five week high amount of Rs. 27.07 billion was accepted over its initial total offered amount of Rs. 18 b and foreign selling interest amidst lack of demand, saw secondary market bond yields increase for a second consecutive week to reflect an parallel shift upwards of the yield curve.

The liquid 2018 maturities (i.e. 1 April 2018 and 15 August 2018) were seen opening the week at levels of 8.75/80 and 8.80/85 respectively and increasing to weekly highs of 8.95% and 9.05%. However, buying interest towards the later part of week saw yields close the week marginally lower against its highs at levels of 8.85/88 and 8.93/97. In addition activity was witnessed on the maturities of 15 July 2017, 15 January 2019, 1 November 2019 and 1 May 2021 within the range of 8.35% to 8.60%, 9.00% to 9.10%, 9.20% to 9.40% and 9.90% to 10.05% respectively as well during the week.

Meanwhile in secondary bill markets, May 2014 bills were traded within the range of 6.70/75, June within 6.72/77, August within 6.80/90 and November within 6.90/00, January within 7.00/05 while the latest 364 day bill was at 7.04/10 post auction. Meanwhile in money market, the overnight call money and repo rates remained steady to average 6.88% and 6.34% respectively for the week as surplus liquidity increased towards the later of the week to close the week at Rs. 28.71 b against its weekly low of Rs. 8.6 billion. The Open Market Operations (OMO) Department of Central Bank was seen mopping up liquidity during the week by way of, one to seven day repo

auctions at weighted averages ranging from 6.54% to 6.67%. Furthermore a total amount of Rs. 55.45 b was drained out by way of four medium term repo auctions as well for durations of 28 days at a weighted average (WAvg) of 6.72%, 30 days at a WAvg of 6.75%, 49 days at a WAvg of 6.76% and 63 days at a WAvg of 6.79% respectively. Rupee gains to a four month high In Forex markets, the rupee was seen appreciating to a four month high of Rs. 130.55 during the week on the back of inward remittances and export conversions outpacing importer demand and balanced foreign flows in equity markets. The daily average USD/LKR traded volume for the first

three days of the week was at US$ 54.44 million. Some of the forward dollar rates that prevailed in the market were: one month – 131.15; three months – 132.15; and six months – 133.68.