Secondary market bond yields increase for a second consecutive day

Friday, 20 June 2014 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities The upward movement in secondary market bond yields continued for a second consecutive day following the monitory policy announcement for the month of June, with yields on the liquid two 2018 maturities (i.e. 1 April 2018 and 15 August 2018) and the 1 July 2019 maturity reflecting increases of five basis points (bp) each and four basis points respectively to hit intraday highs of 8.30%, 8.39% and 8.80%. However, buying interest at these levels curtailed any further upward movement as yields were seen closing the day marginally lower against its intraday highs once again. In addition, a limited amount of activity was witnessed on the 2015 maturities within 7.10% to 7.13%, 2016 within 7.35% to 7.40%, 2017 within 7.66% to 7.68% and 2022 within 9.80% to 9.82%. Nevertheless in secondary bill markets, continued buying interest centering on the 364 day maturity saw it change hands within the range of 6.90% to 6.97%. Meanwhile in money markets yesterday, overnight call money and repo rates remained steady to average 6.99% and 6.57% respectively as Central Bank continued to refrain from conducting any cash valued auctions under its Open Market Operations (OMO). The total surplus of Rs. 4.18 billion was deposited at CBSL’s Standing Deposit Facility Rate (SDFR) of 6.50%. However the OMO department was seen mopping up an amount of Rs. 22.35 billion in total through three term repo auctions at yields of 6.75% for 35 days, 6.80% for 56 days and 6.84% for 77 days, valued today in line with a term maturity. Rupee remains stable In Forex markets, the USD/LKR rate remained mostly unchanged to close the day at levels of Rs. 130.25/30 as markets were at equilibrium. The total USD/LKR traded volume for the previous day (18 June) stood at $ 63.65 million. Some of forward dollar rates that prevailed in the market were: one month – 130.77; three months -131.63; and six months – 132.78.

Rupee ends lower on importer dollar demand

Reuters: The rupee fell for a second straight session on Thursday as dollar demand from importers picked up, and dealers said the central bank intervened in the market to curb excess volatility. The rupee ended at 130.30/35 per dollar, weaker from Wednesday’s close of 130.26/30. On Tuesday, it hit a near one-year high of 130.22/26. “There is importer demand. But the moral suasion did not allow any trade above 130.30,” said a currency dealer asking not to be named. A central bank official at the International Operations Department, however, said there was no moral suasion. “The rupee is trading between 130.20 and 130.30, and we haven’t seen any excess volatility. If there is any excess volatility we will not allow that,” the official said. The Central Bank said on Wednesday it had absorbed around $550 million from the domestic foreign exchange market this year. The bank said in its monetary policy statement on Wednesday that it did not see much demand for imports in April, while private sector credit growth contracted 3.3% year-on-year in the same month, its worst performance since January 2010. The rupee traded steady or firmer till early trade on Wednesday before import demand picked up. The Central Bank bought dollars at Rs. 130.35 on 30 May but started reducing its buying since then, allowing a gradual appreciation in the rupee. Central Bank Governor Ajith Nivard Cabraal told Reuters on 6 June that the rupee was facing appreciation pressure. The bank was condoning the trend on a gradual basis to allow all stakeholders to adjust to the changes. Cabraal had said earlier that the Central Bank would keep intervening in the currency market to prevent a rapid rise in the rupee. Dealers said the Central Bank’s intervention has prevented gains in the currency and they expect the rupee to face upward pressure until credit growth and imports pick up.