Secondary market Treasury bond yields dip considerably across yield curve

Monday, 24 September 2012 00:00 - - {{hitsCtrl.values.hits}}

The Treasury bond market reflected a bull run during the week as yields dipped across all maturities. The reduced offered amounts at the weekly Treasury bill auction, the reduction in Central Bank’s placement rates coupled with markets expectations for rates to drop further were seen as the main reasons behind this.

The weighted averages on the 91 day, 182 day and 364 day maturities dipped the most in 6 weeks to 11.41%, 12.91% and 13.30% respectively, reflecting a decline of three basis points, 21 basis points and six basis points respectively.

Interestingly only an amount of Rs. 7.6 billion was accepted from the total bids received amount of Rs. 27 billion, where the offered amount was only Rs. 7 billion. This led to the more liquid Treasury bonds maturities of 1 April 2014 and 15 July 2015 to dip the most with heavy trades taking place on it.

Accordingly those two maturities reached weekly lows of 12.95% and 13.10% whereas it closed the previous week at levels of 13.71% and 13.91% respectively. The maturities of 01.04.16, 15.06.17 and 15.08.18 were also traded heavily to close the week at levels of 13.40%-13.50%, 13.65%-13.75% and 13.90%-14.00% respectively.

However in contrast to the positive run on the secondary bond market, in money markets, surplus liquidity continued to drop during the week to reach net deficit of Rs. 13.48 billion on Friday. However the overnight call money and repo rates remained steady within the range of 10.50%-10.60% and 9.60%-9.65% respectively as Central Bank conducted reverse repo auctions under its Open Market Operations (OMO) in order to inject money into the system.

In Forex markets the USD/LKR rate appreciated considerably by around 67 cents to Rs. 131.50 yesterday against its previous week’s closing level of Rs. 132.17. However during morning trades on Friday the rupee gained to an intraday high of Rs. 131.30 as considerable volumes were seen been traded throughout the week. Dollar inflows into the system coupled with exporters cashing in on forward dollar contracts was seen as the reasons behind the appreciation.

Given below are some forward dollar rates that prevailed in the market: one month – 132.66; three months – 135.05; and six months – 138.48.

(Courtesy: Wealth Trust Securities)