Secondary market bond yields plunge on policy speculation

Monday, 11 August 2014 00:00 - - {{hitsCtrl.values.hits}}

Swiftly improving debt profile of the county adds further momentum By Wealth Trust Securities The very high speculation surrounding the outcome of the monitory policy meeting for the month of August, scheduled to be released on 15 of August 2014 coupled with the significantly improving debt profile of Sri Lanka as off end June 2014 which is efficiently managed by the Public Debt Department (PDD) of Central Bank, saw secondary market bond yields plunge during the week ending 8 August 2014 on the back of considerable buying interest.

Activity was seen mainly surrounding the two maturities of 1 July 2019 and 1 July 2022 as its yields reflected week on week decline of 25 basis points (bp) and 29 bp respectively to weekly lows of 6.77% and 7.63%, closely followed by the 1 May 2021 dipping by 24 bp to a low of 7.40% and the two 2018’s (i.e. 01.04.2018 & 15.08.2018) by 22 bp each to lows of 6.70% and 6.72% respectively. In addition, on the shorter end of the yield curve the 2016 maturities were seen dipping by 30 bp week on week to a low of 6.30%, the 2017 maturities by 20 bp to 6.53% while on the longer end the 01st January 2024 dipped by 13 bp to a low of 8.02% while the two 2029 maturities (i.e. 01.01.2029 & 01.05.2019) reflected dips of 18 bp each to lows of 9.05%. The overall yield curve reflected a parallel sift downwards for a fourth consecutive week. Meanwhile, continued demand for Treasury bills saw its yields declining during the week as the 91 day, 182 day and 364 day bills was quoted at levels of 6.25/30, 6.30/35 and 6.35/40 respectively. Meanwhile in money markets, Overnight call money and repo rates remained steady to average 6.64% and 6.53% respectively during the week as average surplus liquidity in the system dipped to Rs. 32.58 billion in comparison to its previous week’s average of Rs. 41.81 billion. Rupee closes the week at a three week high The rupee was seen gaining to a three week high of Rs. 130.17/19 during the week as dollar inflows and export conversions were seen outweighing importer demand. The daily average USD/LKR traded volume for the first four days of last week was US $ 65.70 million. Some of the closing forward dollar rates that prevailed in the market were 1 month – 130.46; 3 months – 131.02 and 6 months – 131.96.