Secondary bond market activity high as benchmark interest rates decrease further

Monday, 24 February 2014 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities The downward trend in secondary market bond yields witnessed during the previous week continued with the yields declining further. The yields at the weekly treasury bill auction too declined by two basis points across the boards to 6.75% for 91 days, 6.90% for 182 days and 7.08% for 364 days.

The liquid 2018 maturities (i.e. 1 April 2018 and 15 August 2018) which opened the week at levels of 8.91/97 and 9.01/08 dropped to weekly lows of 8.72% and 8.80% respectively, as activity remained high. Furthermore, demand for the 1 April 2016 and 15 July 2017 maturities resulted in its yields dipping to weekly lows of 7.32% and 8.35% against its opening levels of 7.50/65 and 8.50/60 while the 2019 maturities (i.e. 15 January 2019 and 1 July 2019) changed hands between 8.98% and 9.10%. The secondary bill market too was active with substantial demand before and after the auction. Bills maturing in October 2014 changed hands within the range of 6.85% to 6.90% and bills maturing in November 2014 within a range 6.90% to 6.95%

with the 364 day bills closing the week at 7.00/05. In the money markets, overnight call money and repo rates remained steady throughout to average 6.97% and 6.43% respectively as market liquidity closed the week at a surplus of Rs. 56.20 billion. The Open Market Operations (OMO) Department of the Central Bank mopped up liquidity during the week by way of one to seven day term repo auctions at weighted averages ranging from 6.66% to 6.69%. Furthermore it carried out three medium term repo auctions as well, totalling Rs. 70 b for durations of 28 days and 77 days. However, only an amount of Rs. 27.56 b in total was drained out through this method at WAvgs of 6.72% and 6.80% respectively.

Rupee dips further during the week The rupee lost ground during the week on the back of importer demand to a low of Rs. 130.95 in comparison to its last week’s closing level of 130.84/87. The daily average USD/LKR traded volume for the first three days of the week was at US$ 73.68 million. Some of the forward dollar rates that prevailed in the market were: one month – 131.50; three months – 132.62; and six months – 134.08.