Secondary market bond yields broadly steady as activity dries up

Friday, 28 August 2015 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities

Activity in secondary bond markets was seen drying up considerably yesterday as yields were seen closing the day broadly steady. A limited amount of activity was witnessed on the 15.08.2018, 01.09.2013 and 01.08.2015 maturities at levels of 8.20%, 9.94% to 9.96% and 10.05% to 10.15% respectively while in secondary bill markets the 91-day bill was seen changing hands within the range of 6.80% to 6.85%.

Meanwhile, in money markets, overnight call money and repo rates increased marginally to average 6.28% and 6.19% respectively as the Open Market Operations (OMO) department of the Central Bank refrained from conducting a reverse repo auction for the first time in six days. The surplus liquidity in the market dipped to Rs. 38.26 billion yesterday.

Rupee remains steady

The USD/LKR rates on spot contracts remained steady to close the day at Rs.134.15. The total USD/LKR traded volume for 26 August 2015 was US $ 72.30 million.

Some of the forward USD/LKR rates that prevailed in the market were one month - 134.75/85; three months - 135.97/07 and six months - 137.79/89.

Rupee steady amid dollar selling by State-run bank

Reuters: The rupee ended steady on Thursday amid importer dollar demand as a State-run bank, through which the central bank usually directs the market, sold the greenback at a flat rate of 134.15.

The bank reduced the currency’s peg against the dollar by 10 cents on Wednesday, allowing the exchange rate to appreciate to 134.15 after allowing a 75 cent fall on six occasions from 5 August through Tuesday. The rupee ended steady at 134.15 per dollar on Thursday.

The market had expected the Central Bank to allow the rupee to depreciate further, in line with other regional currencies that have declined against the dollar.

“The import pressure is there. With regional currencies also weakening against the dollar, importers want to settle their bills,” said a currency dealer on condition of anonymity.

Currency dealers expect the central bank, which has so far this year directed the market through the state-run bank, to let the currency remain weaker after last week’s parliament elections, due to importer dollar demand and the global trend of weakening currencies against the dollar.

They said defending the rupee could have a negative impact on the country’s international trade due to an over-valued currency.

Analysts said the rupee may fall to 137 levels in the short term if the Central Bank allows it to depreciate, in line with the weakening seen in other global currencies.

Currency dealers said the rupee is under pressure to depreciate with heavy importer dollar demand and reluctant exporter greenback sales.

Central Bank officials were not immediately available for comment.