Policy rates held steady for August

Wednesday, 31 August 2016 00:01 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities

The Central Bank of Sri Lanka was seen holding its policy rates steady for August at 7.00% and 8.50% following a 50 basis points increase at its July announcement, citing that the monitory tightening adopted during the first seven months of this year is being transmitted to the economy gradually.

In the secondary bond market yesterday, yields remained broadly steady ahead of today’s weekly Treasury bills auction. The liquid maturities of 01.03.21, 01.08.24 and 01.08.26 were seen changing hands within a thin range of 11.73% to 11.74%, 12.12% to 12.14% and 12.35% to 12.37% respectively against its previous day’s closing levels of 11.67/75, 12.08/15 and 12.33/38. In addition, the 2019’s and 15.03.2025 maturities were traded at levels of 11.40% and 12.26% as well. In secondary bill markets, August 2017 bills continued to change hands at 10.70%.

At today’s weekly bill auction, a total of Rs. 26 billion will be on offer consisting of Rs. 6 billion on the 91-day, Rs. 8 billion on the 182-day and Rs. 12 billion on the 364-day maturities. At last week’s auction, the weighted averages on the 91-day and 364-day maturities increased by 03 and 01 basis point respectively to 9.04% and 10.75% while the weighted average on the 182-day remained steady at 9.94%.

In money markets, the net surplus liquidity in the system increased further to Rs. 9.6 billion yesterday as call money and repo rates averaged at 8.40% and 8.51% respectively. The Open Market Operations (OMO) department of the Central Bank was seen rejecting all bids on its overnight reverse repo auction, where an amount of Rs. 5 billion was on offer.

Rupee remains stable

The USD/LKR rate on its spot next and one-week forward contracts remained mostly unchanged to close the day at Rs. 145.60/65 and Rs. 145.70/85 respectively yesterday. The total USD/LKR traded volume for 29 August 2016 was $ 41.75 million.

Some of the forward USD/LKR rates that prevailed in the market were one month - 146.50/60; three months - 148.10/20 and six months - 150.50/60.