Secondary market bond prices stagnant ahead of policy announcement

By Wealth Trust Securities

As markets eagerly awaited the outcome of the monetary policy announcement due today (16 April), secondary market bond prices were mostly unchanged for the week ending 12 April, subsequent to fluctuation within a thin band over the week.

It was the three-year and five-year maturities which derived the most amount of volumes as it closed the week at levels of 11.25/28 and 11.40/42 respectively. In addition, the four-year maturity changed hands within the range of 11.10% to 11.20% while the six-year was seen being traded at levels of 11.47% to 11.55%. Furthermore, activity on the longer leg of the yield curve was witnessed throughout the week with the nineteen-year maturity changing hands at levels of 12.30% to 12.38%. In contrast to the bond market, prices on secondary market bills increased towards the latter part of the week, due to considerable buying interest with durations ranging from 8 to 11 months changing hands within the range of 11.10% to 11.20% while the 364-day bill closed the week at 11.22/28. This was subsequent to the outcome of last week’s bill auction, where the weighted average (WAvg) on the 91-day bill dipped by one basis point for the first time in six weeks while the 182-day bill was accepted for the first time in three weeks and the WAvg on the 364-day bill remained unchanged for a third consecutive week.

 Meanwhile in the money market, overnight call money and repo rates remained at levels of 9.40% - 9.50 % and 8.55% - 8.70% respectively during the week as surplus liquidity in the system for the first four days averaged at Rs. 40.53 billion. The Central Bank continued the practice of conducting daily repo auctions throughout the week in order to drain out excess liquidity in system at a steady weighted average of 8.35%. Furthermore the Central Bank conducted auctions for outright sales of bills for the first time since 14 March and drained out in total Rs. 14.5 billion from the system for tenures ranging from 21 days to 42.

Rupee appreciates to a one year high during the week

The rupee continued to appreciate during the week to a yearly high of Rs. 125.25 on the back of seasonal foreign remittances and export conversions coupled with the positive news of Bank of Ceylon raising US$ 500 million through a bond issue.

The total USD/LKR traded volume for the first four days of this week stood at US$ 93.64 million. Given below are some forward dollar rates that prevailed in the market.  1 - Month - 126.42; 3 - Months- 128.42 and 6 - Months- 131.22