Secondary market Bond yields up after weekly Bill auction dip

By Wealth Trust Securities

Secondary market Treasury bond yields continued to increase yesterday across the yield curve mainly on the 6 year and 8 year maturities followed by the two liquid five year maturities (i.e. 15.08.2018 and 01.04.2018) even as weighted averages (WAvg) at Wednesday’s weekly Treasury bill auction dipped for a tenth consecutive week. The WAvg on the 91 day bill dipped the most by 15 basis points (bp) to 9.10% and the 182 day bill by 8 bp to 10.08% while the 364 day bill reflected a dip of only 1 bp to 11.10%. The 364 day bill kept its dominance over the auction for a tenth straight week as it represented 62% of the total accepted amount. An overall amount of Rs. 24.4 billion was accepted against its initial total offered amount of Rs. 15 billion.

The two liquid five year maturities closed the day at levels of 10.92%-11.00% yesterday subsequent to hitting a two week high of 11.00% on Wednesday. In addition a limited amount of activity was witnessed on the longer tenure of the yield curve as well, with the 8 year bond hitting an intraday high of 11.60% before it closed the day at levels of 11.55/65% while the 6 year bond was seen been quoted at levels of 11.50/65%. The upward trend in secondary market yields was seen mainly due to some market participants showing interest in reducing their duration by selling the longer leg of the yield curve and buying the shorter leg coupled with a correction on the yield curve which continued to reflect an inversion on the first half of the curve according to market sources. Furthermore in secondary market bills the 364 day bill was seen been quoted at levels of 11.07/10% and the 182 day bill at levels of 10.00/15%.

Meanwhile in money markets, overnight surplus liquidity continued to remain high at Rs. 34.85 billion yesterday with an amount of Rs 31.07 billion been drained by way of an overnight Repo auction at a WAvg of 8.35%. This in turn helped call money and repo rates hold steady to average 9.51% and 8.59% respectively.

 Rupee at a two week low  (subhead)

In Forex markets, the rupee lost ground by 12 cents yesterday to close the day at Rs 126.60 on importer demand. The total USD/LKR traded volume for the previous day (14-02-13) stood at US $ 46.28 million.