Secondary bond market activity moderates as liquidity dries up

Friday, 9 May 2014 01:10 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities The surplus liquidity in money markets on an overnight basis remained low at Rs. 4.87 billion yesterday from its one month low of Rs. 2.24 billion recorded in Wednesday while the total amount was deposited at CBSL’s Standing Deposit Facility Rate (SDFR) of 6.50% as the Open Market Operations (OMO) department of Central Bank continued to refrain from conducting any OMO auctions for a third consecutive day. This led to overnight call money and repo rates increasing further to average at 6.95% a

nd 6.61% respectively. However liquidity was expected to increase t oday as the OMO department was seen successfully draining out in total an amount of Rs. 43.73 billion by way of three term Repo auctions towards the latter part of yesterday, for 28 days at a weighted average (WAvg) of 6.71%, 63 days at 6.78% and 77 days at 6.81% respectively in line with term maturities due today. Activity in secondary bond markets moderated yesterday as yields remained mostly unchanged with two-way quotes on the liquid two 2018 maturities (i.e. 1 April 2018 and 15 August 2018) and 1 July 2019 maturity seen at levels of 8.59/62, 8.68/72 and 8.99/02 respectively due to the wait-and-see approach by most market participants ahead of a shortened trading week commencing 12 May and monetary policy announcement for the month of May. Furthermore, a limited amount of activity was witnessed on the maturities of 1 November 2015 and 1 September 2016 within the range of 7.23% to 7.25% and 9.62 to 9.64% respectively.

Rupee continued to appreciate further In Forex markets, the rupee appreciated further by around eight cents yesterday to close the day at Rs. 130.50/52 in comparison to its previous day’s closing level of Rs. 130.58/60 on the back of reducing importer dollar demand. The total USD/LKR traded volume for the previous day (7 May) stood at $ 67.15 million. Some of the forward dollar rates that prevailed in the market were: one month – 131.04; three months – 131.99; and six months – 133.59 .