Parallel shift upwards on the overall yield curve witnessed last week

Monday, 24 March 2014 00:02 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities The upward momentum observed in secondary market bond yields for the week ending 14 March, was carried forward to last week as well (week ending 21 March) as specific selling interest on the five year bond maturity of 01.07.2019 and on the seven year maturity of 01.05.2021 on the back of considerable volumes during the early part of last week reflected in an parallel shift upwards on the overall yield curve.

Activity was witnessed across the yield curve, with yields on the 2015 bond maturities increasing to a weekly high of 7.20%, 2016 maturities to a high of 7.60% and 2017 to 8.40%. In addition, the more liquid 2018 maturities (i.e. 01.04.2018 and 15.08.2018) were seen increasing to a five week high of 9.12% and 9.15% respectively followed by the 2019 maturity spiking to 9.50% and the 2021 maturity to 10.25%. However yields were seen taking a ‘U’ turn on Friday following the monitory policy announcement at where policy rates were held steady for a second consecutive month as considerable buying interest set in. The downward movement was further supported by the outcome of the weekly Treasury bill auction, at where weighted averages declined for a twenty sixth (26th) consecutive week as the total accepted amount exceeded the total offered amount for an eighth consecutive week as well. Meanwhile in money markets, overnight call money and repo rates remained steady to average 6.89% and 6.40% respectively for the week as surplus liquidity increased towards the later of the week to close the week at Rs. 32.96 billion against its weekly low of Rs. 6.1 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 (WAvgs) ranging from 6.55% to 6.67%. Furthermore a total amount of Rs. 17.68 billion was drained out by way of six medium term repo auctions as well for durations of 11 days at a WAvg of 6.65%, 14 days at a WAvg of 6.67%, 18 days at a WAvg of 6.69%, 35 days at a WAvg of 6.77% and 56 days at a WAvg of 6.80% respectively. Rupee remains steady The rupee remained steady for a second consecutive week to close the week at Rs. 130.60/65 on the back of market equilibrium. The daily average USD/LKR traded volume for the first four days of the week was at $ 46.25 million. Some of the forward dollar rates that prevailed in the market were 1-Month: Rs. 131.20, 3-Months: Rs. 132.23 and 6-Months: Rs. 133.73.