Secondary market Treasury yields dip further on policy speculation ahead of weekly auction

Wednesday, 7 May 2014 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities Speculation on the outcome of this month’s (May) monetary policy announcement coupled with the healthy external sector performance and an upgrade to Sri Lanka’s economic growth forecast for 2014 to 7.0% from its earlier forecasted 6.5% by the International Monetary Fund saw secondary market bond yields decreasing across the yield curve yesterday.

Activity continued to centre the liquid two 2018 maturities (i.e. 1 April 2018 and 15 August 2018) and the 1 July 2019 maturity as its yields were seen hitting intraday lows of 8.60%, 8.70% and 9.00% respectively against its previous days closings of 8.69%, 8.79% and 9.04% on the back of considerable volumes changing hands. In addition, a limited amount of activity was witnessed on the 1 May 2021 maturity within the range of 9.75% to 9.78% while on the shorter leg of the yield curve the 2015 and 2016 maturities were seen changing hands within the range of 7.25% to 7.28% and 7.68% to 7.72% respectively. This was ahead of today’s weekly Treasury bill auction, at where an total amount of Rs. 10 billion will be on offer in comparison to its previous week’s amount of Rs. 15 billion consisting of Rs. 2 b on the 182 day maturity and Rs. 8 b on the market favourite 364 day maturity. Interestingly the 91 day maturity will not be on offer for the first time in 25 weeks. At last week’s auction, the total accepted amount fell below the total offered amount for the first time in four weeks while all bids for the 91 day maturity was rejected for the first time in 12 weeks as well. The weighted average (WAvg) on the 182 day maturity dipped by one basis point (bp) to 6.78% while the WAvg on the 364 day maturity remained unchanged at 7.02% as it represented 65% of the total accepted amount of Rs. 11.39 billion. Meanwhile in money markets, overnight call money and repo rates remained steady to average 6.93% and 6.50% respectively despite surplus liquidity in money market decreasing to Rs. 4.99 b as the Open Market Operations (OMO) department of the Central Bank refrained from conducting any auctions yesterday. The total surplus was seen been deposited at CBSL’s Standing Deposit Facility Rate (SDFR) of 6.50%. Rupee remains steady Meanwhile in Forex markets yesterday, the USD/LKR rate closed the day mostly unchanged at Rs. 130.60/61 as markets were at equilibrium. The total USD/LKR traded volume for the previous day (5 May) stood at $ 93.30 million. Some of the forward dollar rates that prevailed in the market were: one month – 131.14; three months -132.08; and six months – 133.66.