Parallel shift upwards on the yield curve for the first time in six weeks

Monday, 28 April 2014 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities The secondary markets for Treasury bills and bonds started the week with the monetary policy announcement for the month of April, where the Central Bank kept its policy rates unchanged at 6.50% and 8.00% for a third consecutive month.

Overall activity increased towards the latter part of the week ending 25 April, as yields were seen increasing gradually reversing a downward trend witnessed over the previous five weeks. This was despite weighted averages (WAvg) on the 91-day and the 364-day bill maturities decreasing at its weekly primary auction, while the WAvg of the 1820day bill remained unchanged as the total accepted amount exceeded the total offered amount. The belly-end to the longer end of the yield curve witnessed a marginal parallel shift upwards with the liquid two 2018 maturities (i.e. 01.04.2018 & 15.08.2018) hitting weekly highs of 8.75% and 8.86% respectively against its lows of 8.71% and 8.82%, the five-year maturity of 01.07.2019 to 9.11% against 9.02% and the seven-year maturity 01.05.2021 to 9.90% against 9.85%. In addition, considerable volumes on the one and a half year maturity of 01.11.2015 was seen changing hands within the range of 7.30% to 7.38% during the week followed by the two year maturity of 01.08.2016 with the range of 7.60% to 7.70%. Meanwhile in money market, Overnight Call money and repo rates remained resilient at levels of 6.50% to 6.55 % and 6.95% to 7.00% respectively during the week despite surplus liquidity seesawing from a low of Rs. 13.51 billion to a high of Rs. 39.84 billion. Excess liquidity was continuously drained out by way of repo auctions during the week by the Open Market Operations (OMO) department of Central Bank, for durations ranging from overnight to 77 days at WAvgs of 6.53% to 6.81%. Rupee closes the week steady The two way quote on the rupee was seen fluctuating within a narrow range of Rs. 130.60-Rs. 130.66 during the week to close the week at Rs. 130.60/62 as the broader market was at equilibrium. The daily average USD/LKR traded volume for the first four days of the week was at $ 48.45 million.

Some of the forward dollar rates that prevailed in the market were 1-Month: Rs. 131.11, 3-Months: Rs. 132.21 and 6-Months: Rs. 133.81.