Secondary market Treasury yields flat ahead of weekly auction

The yields on secondary market Treasury bonds closed the day rather flat yesterday ahead of the weekly Treasury bill auction to be held today.

It’s widely expected that weighted averages will decline significantly across the board at today’s auction as an amount of Rs. 10 b is being offered. At last week’s auction weighted averages declined by three bp, 21 bp and six bp respectively on the 91-day, 182-day and 364-day maturities, to levels of 11.41%, 12.91% and 13.30%.

Yields on the more active three-year and five-year maturities increased by six bp and 10 bp respectively to intraday highs of 13.40% and 13.92% in early hours of trading yesterday. However, considerable buying interest at these levels saw its yields dip once again to its opening levels towards the latter part of the day.

Furthermore, activity was witnessed on all other durations as well as yields remained mostly unchanged and volumes changing hands remained high. Meanwhile in money markets, surplus liquidity continued to be in the negative for a fourth consecutive day at Rs. 6.155 b yesterday as the Central Bank injected an amount of Rs. 5 b into the system through its Open Market Operations (OMO) at a weighted average of 9.674%. This in turn helped keep overnight call money and repo rates steady to average 10.57% and 9.64% respectively.

Rupee gains to 131 for the first time in two months

In forex markets, the rupee appreciated to levels of Rs. 131 for the first time in two months on continued forward dollar sales, lesser import demand and expectations of a further narrowing of the trade deficit for the coming months.

Furthermore, the USD/LKR volume for 24 September 2012 was US$ 60 million.  Given are some forward dollar rates that prevailed in the market: one month – 132.33; three months – 134.68; and six months – 138.25.