Secondary market bond yields dip despite weak demand at weekly auction

Thursday, 3 April 2014 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities The total accepted amount at yesterday’s weekly Treasury bill auction was down to a three and a half year low of Rs. 2.18 billion, the lowest recorded since 13 October 2010. However, weighted averages (WAvgs) were seen dipping for a twenty eighth (28) consecutive week with the 91-day and 182-day maturities reflecting dips of 1 basis points (bp) each to 6.64% and 6.81% respectively while the WAvg on the 364-day maturity remained unchanged for a third consecutive week at 7.05%.

The yield movement in secondary bond markets continued to remain bullish yesterday, as yields on the liquid two 2018 maturities (i.e. 01.04.2018 & 15.08.18) and the 01.07.2019 maturity were seen dipping once again to hit daily lows of 8.80%, 8.90% and 9.13% respectively as considerable volumes were seen changing hands. In addition, the 01.05.2021 maturity was seen changing hands as well within the range of 9.94% to 9.98% while the one and a half year maturity of 01.11.2015 was seen traded at 7.60%. In secondary bill markets, the 364-day bill was seen quoted at levels of 7.04/08 post auction. Meanwhile in money markets, the total surplus of Rs. 4.28 billion was deposited at CBSL’s Standing Deposit Facility Rate (SDFR) of 6.50% as Central Bank refrained from conducting any auctions under its Open Market Operations (OMO) yesterday. This in turn kept overnight call money and repo rates steady to average 6.98% and 6.57% respectively. Rupee remains steady for a sixth consecutive week The dollar/rupee (USD/LKR) rate remained steady for a sixth consecutive day to close the day at Rs. 130.70 - Rs. 130.75 yesterday. The total USD/LKR traded volume for the previous day (1 April 2014) stood at $ 122.80 million. Some of the forward dollar rates that prevailed in the market were 1-Month: Rs. 131.34, 3-Months: Rs. 132.47 and 6-Months: Rs. 133.94.

Rupee ends steady; likely to gain

Reuters: The rupee ended steady for a sixth straight session on Wednesday despite some importer dollar demand, as banks were reluctant to trade the local currency beyond 130.70 per dollar due to moral suasion by the Central Bank, dealers said. However, the current depreciation pressure is expected to ease due to expected inflows from remittances that will prompt dollar selling by banks, dealers said. The spot rupee closed flat at 130.70/75 per dollar. The rupee forwards ended weaker at 130.76/79 per dollar, compared with Tuesday’s close of 130.73/76. But the pressure on forwards is expected to ease due to remittances, exporter and bank dollar sales ahead of the festive season, dealers said. “We have seen some selling by banks in the latter part of the day due to low rupee liquidity and some exporter dollar sales,” said a currency dealer asking not to be named. Dealers said the Central Bank had asked banks to keep the rupee at the 130.70-per-dollar level to reduce volatility. On Monday, Nandalal Weerasinghe, one of the Central Bank’s Deputy Governors, told Reuters that the central bank has not changed its policy of not targeting any specific rate but moral suasion is one of the instruments many central banks use to manage short-term volatility. Dealers expect the rupee to appreciate from early April, with a dip in importer dollar demand and a rise in inward remittances before the traditional Sinhala-Tamil New Year. Central Bank Governor Ajith Nivard Cabraal said on 19 March that the rupee would be stable throughout this year due to increasing inflows from exports and remittances. Dealers said lack of credit demand for imports will help reduce downward pressure on the rupee. The currency gained 0.25% since 27 February, but has fallen 0.08% so far this year, Thomson Reuters data showed.