Secondary bond and bills markets remained active throughout the week

By Wealth Trust Securities

As overnight money market liquidity increased to a four-month high and remained high during last week, following a bond maturity which fell due on 15 January to the tune of Rs. 72.9 billion and dollar inflows into rupee bonds, the weighted average on 364 day bill declined further by nine basis points (bp) at its weekly Treasury bill auction to record a total deduction of 160 bp over the past six auctions.

Meanwhile, the weighted average on the 182 day bill dipped the most by 23 basis points to 10.58% while the 91 day bill dipped by 13 basis points to 9.75% for a sixth straight week as well.

In secondary bond markets yields reflected a marginal downward trend during the first half of the week and edged up towards the latter part of the week on the back of further profit taking and selling pressure.

Accordingly a majority of activity was witnessed on the two liquid five-year maturities (i.e. 15 August 2018 and 1 April 2018) from weekly lows of 10.90% and 11.00% respectively at the beginning of the week to highs of 11.05% and 11.10% respectively towards the latter part of the week.However, buying interest on secondary market bills continued during the week with the 91 day and 182 bills changing hands at weekly low levels of 9.50% and 10.40% respectively while the 364 day bill was seen changing hands within the range of 11.10%-11.15%, as Central Bank reduced their total offered amount for a second consecutive to Rs. 20 billion for this week’s auction. Meanwhile in money markets, overnight call money and repo rates continued to edge down marginally throughout the week as surplus liquidity increased drastically to close the week at Rs 35.2 b. Call money and repo averaged 9.72% and 8.98% respectively for the week as the surplus liquidity continued to be mopped up on an overnight basis by way of Repo auctions at weighted averages ranging from 8.47% to 8.50%.

Rupee loses ground during the week

The rupee lost ground by around 30 cents during the week to close the week at levels of Rs. 126.50/55. It hit a weekly low of Rs. 126.75 on the back of importer demand for forward dollar contracts. The total dollar/rupee volume for the previous day (17 January 2013) was US$ 47.85 million. Some of the forward dollar rates that prevailed in the market were one month – 127.55; three months – 129.44; and six months – 131.90.