Secondary market bond yields continue to drop ahead of policy decision

Monday, 26 January 2015 00:06 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities The downward trend in secondary bond market yields continued for a second consecutive week with continued buying interest resulting in yields dipping further. This is all ahead of the vital monetary policy decision for the month of January, which is scheduled to be released on the 27.

The most actively traded bonds were the 1July 2019 and 1July 2022 maturities with their yields reflecting a week on week decline of 35 basis points (bp) and 32 bp respectively to 7.02% and 7.50%. This trend was closely followed by the two 2018’s (i.e. 01.04.2018 & 15.08.2018) with yields dipping 20 bp each to lows of 7.02% and 7.05%, and the 15th May 2017 maturity which declined to 6.95%. However, selling interest at these levels fuelled by profit taking resulted in yields closing the week marginally higher. The decline that was witnessed in the secondary market bond yields was despite the Treasury bill weighted averages at the weekly auction increasing by 01 basis point across the board to 5.80% on the 91 day, 5.90% on the 182 day and 6.05% on the 364 day maturity. In money markets, overnight call money and repo rates decreased further to average 5.82% and 5.19% respectively, with the average surplus liquidity in the system remaining at Rs. 48.54 billion. The Open Market Operations (OMO) Department of the Central Bank continued to mop up liquidity during the week by way of two 77 day term repo auctions at weighted averages ranging from 5.86% to 6.00%, as well as draining out liquidity by way of an outright bill auction, which was conducted for the first time in three months at weighted averages of 5.74% and 5.78% for maturities of 42 and 70 days. Rupee dips during week In dollar/rupee markets, the rupee on spot next contracts was seen depreciating above Rs. 133.00 towards the latter part of the week against its previous weeks closing of Rs. 132.35/45 before closing slightly higher once again at Rs.132.95/05. The daily USD/LKR average traded volume for the first four days of the week stood at $ 49.38 million. Some of the forward dollar rates that prevailed in the market were 1 Month - 133.50; 3 Months - 134.35 and 6 Months - 135.75.