Secondary market Bond yields dip to over 17-month lows

By Wealth Trust Securities

Continued buying interest across the yield curve during the week ending 4 August saw secondary market bond yields decreasing for a fourth consecutive week. This bullish sentiment was also reflected in the weekly primary bill auction where the weighted averages decreased considerably to 17-month lows.

Activity primarily centred on the liquid maturities of the three 2021s (i.e. 01.03.21, 01.08.21 and 15.12.21), 01.07.22, 15.05.23, 01.08.24, 15.03.25, 01.08.26 and 15.05.30 as its yields were seen dipping to over seventeen month lows of 10.18%, 10.21%, 10.17%, 10.32%, 10.35%, 10.40%, 10.48% and 10.82% respectively. In addition, on the short end of the curve, 2018 maturities along with 2019 maturities were seen changing hands within the range of 9.15% to 9.50% and 9.50% to 10.00% as well. However, the downward movement in yields was seen curtailed towards the latter part of the week on the back of profit taking and foreign selling interest.

Meanwhile, the foreign holding in rupee bonds was seen reversing its increasing trend witnessed over the previous three weeks to record a marginal outflow of Rs.163 million for the week ending 2 August.

The daily secondary market Treasury bond transacted volume for the first four days of the week averaged Rs.14.99 billion.

In money markets, the overnight call money and repo rate averaged at 8.74% and 8.76% respectively for the week as the OMO department of Central bank was seen draining out in total an amount of Rs.10.75 billion from the system through two outright auctions at weighted averages of 8.65% to 8.90% for durations of 35 to 42 days. 

The average surplus liquidity in the system stood at Rs.20.81 billion for the week with the OMO department of Central bank continuously draining out liquidity by way of overnight repo auctions as well at weighted averages ranging from 7.34% and 7.40%.

Rupee gains during the week

The rupee on spot next contracts closed the week higher at Rs.153.35/45 against its week’s previous weeks closing levels of Rs.153.72/78 on the back of exporter conversion outweighing importer demand.

The daily USD/LKR average traded volume for the four days of the week stood at $ 93.90 million.

Some of the forward dollar rates that prevailed in the market were one month – 154.15/25; three months – 155.75/85; and six months – 158.45/55.