Primary auction rates continue to tumble; secondary market yields follow suit

Thursday, 7 August 2014 00:51 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities The continued demand for shorter tenure maturities in secondary bond and bill markets saw weighted averages (WAvgs) at yesterday’s Treasury bill auction declining further with the 364 day maturity WAvg falling below CBSL’s Standing Deposit Facility Rate (SDFR) of 6.50%, following the trend of the 91 day and 182 day maturities.

The WAvg on the 364 day bill dipped the most by 13 basis points (bp) to 6.45% while the 91 day and 182 day bills reflected dips of eight bp each to 6.39% and 6.28% respectively. The market favourite 364 day bill continued to dominate the auction as it represented 81% of the total accepted amount, which was only Rs. 0.6 billion more than its initial offered amount of Rs 12 Bn.

Activity in secondary bond markets continued to remain high yesterday as yields were seen dipping across the yield curve following the outcome of the Treasury bill auction, with the most frequently quoted maturities of 1 July 2019 and 1 July 2022 decreasing to daily lows of 7.00% and 7.93% respectively from its opening highs of 7.10% and 8.00%. In addition, a considerable amount of activity was witnessed on the liquid two 2018 maturities (i.e. 1 April 2018 and 15 August 2018) and the two 2029 maturities (i.e. 1 January 2029 and 1 May 2029) with the range of 6.88%-6.92%, 6.95%-7.05%, 9.23% -9.28% and 9.24%-9.28% respectively while demand for shorter tenure bond maturities saw the 2017 maturities been quoted at levels of 6.70%-6.75%. In secondary bill markets, the 364 day bill was seen been quoted at levels of 6.40% to 6.45% post auction while 182 day bills were seen changing hands at levels of 6.35% to 6.40%. Meanwhile in money markets, surplus liquidity stood at Rs. 18.48 billion yesterday as Central Bank continued to refrain from conducting any Open market Operations (OMO). The total surplus amount was deposited at Central Bank’s Standing Deposit Facility Rate (SDFR) of 6.50%. Overnight call money and repo rates remained steady to average 6.63% and 6.53% respectively. Rupee gains marginally The rupee closed the day marginally higher at Rs. 130.19/21 yesterday in comparison to its previous day’s closing levels of Rs. 130.21/23 on the back of export conversions outweighing importer demand. The total USD/LKR traded volumes for 5 August stood at $ 82.30 million. Some of the forward dollar rates that prevailed in the market were: one month – 130.47; three months – 131.05; and six months – 132.05.