Secondary market Treasury yields dip

Wealth Trust’ Debt Market Report

•  Liquidity surges and foreign holding in Government securities reaches its limit

As predicted yesterday, with the announcement of an Rs 58 Bn repo auction by the Open Market Operations (OMO) department of Central bank, secondary market Treasury bill and bond rates declined marginally reflecting a downward shift on the yield curve.

An amount of Rs 23.7 Bn was mopped up from the system at a weighted average of 9.40%. Overall surplus was at Rs 58.8 Bn. An part conversion of over US $ 400 million of the US $ 1 Bn sovereign dollar bond, into Rupees was seen as the reason for the increase in liquidity. Furthermore the allocated component of 12.50% of total outstanding Treasury bills and bonds to foreign investors was fully taken up by yesterday, reflecting more dollar inflows into the system.

In heavy secondary market trading the 20 month bond and the 5 year bond reflected the most amount of activity, with its yields dipping to intraday lows of 13.60% and 14.28% respectively. However subsequent profit taking saw yields edge up once again to close the day at 13.68% and 14.32% respectively.  The increase in liquidity is expected to drive the downward trend in treasury yields moving forward. Given below are the secondary market closing yields for the most frequently traded maturities,

Furthermore the Public Debt Department of Central Bank conducted three bond auctions yesterday, ahead of its upcoming bond maturity on the 1st of August 2012. Given below are the details of the auction,

Overnight call money and repo rates to dip

With market liquidity increasing to a staggering R 58.8 Bn, overnight call money and repo rates are expected to decline from today in comparison to its previous days levels. Call money averaged 10.62% yesterday while repo averaged 9.60%.   

The Rupee continued to dip marginally in intraday trading

The rupee dipped further by around 20 cents yesterday to close the day at 131.25/131.30 in two way quotes. Activity was very limited according to dealers.

Courtesy: Wealth Securities Ltd