Reduction in Statutory Reserve Requirement turns bond markets bullish
Thursday, 27 June 2013 01:47
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By Wealth Trust Securities
The reduction in the Statu-tory Reserve Requirement (SRR) for all commercial banks in Sri Lanka by 200 basis points yesterday saw bond markets turn bullish as yields dipped across the board considerably.
The reduction in the SRR rate is expected to add around Rs. 50 to Rs. 60 billion into money markets from the 1 July 2013 onwards.
The reduction in secondary market bond yields was further supported by the drop in weighted averages (WAvg) at yesterday’s weekly Treasury bill auction. The 364-day bill reflected the sharpest decline of 19 basis points (bp) to 10.66% while the 182-day bill dipped by 10 basis points to 9.70%.
However the 91-day bill WAvg continued to hold steady at 8.66%. Once again the 364-day maturity continued to dominate the auction as it represented 80% of the total accepted amount of Rs. 42.4 billion, which was Rs. 30.4 billion higher than the initial total offered amount of Rs. 12 billion.
In secondary bonds markets, the sharp decline in yields was mainly reflected on the liquid two five-year maturities (i.e. 1 April 2018 and 15 August 2018) as its yields dipped by 35 basis points each to close the day at levels of 11.22/25 and 11.28/32 respectively in comparison to its previous day’s closing levels of 11.60/62 and 11.65/68.
It was seen hitting intraday lows of 11.15% and 11.24% respectively as well.
In addition, the eight-year maturity was seen being quoted at levels of 11.40/60 while the 364-day bill closed the day at 10.62/68 subsequent to changing hands within the range of 11.64% to 11.67% in secondary markets.
Given below are the closing, secondary market yields for the most frequently traded maturities, In money markets yesterday, the average overnight call money and repo rates dipped marginally to 8.54% and 8.14% respectively as overnight surplus liquidity in money markets increased to Rs. 12.87 billion.
The Open Market Operations (OMO) department of the Central Bank drained an amount of Rs. 8.88 billion from the system at a weighted average of 7.78% by way of an overnight Repo auction with a further amount of Rs. 3.99 billion being deposited at its repo window rate of 7.00%.
