Shorter tenure benchmark yields hit seventeen year lows

Wednesday, 12 February 2014 00:00 - - {{hitsCtrl.values.hits}}

Liquidity dips to a five week low

By Wealth Trust Securities Weighted averages (WAvgs) on the 91-day and 182-day bill maturities decreased by 5 basis points (bp) and 8 bp respectively to seventeen (17) year lows of 6.77% and 6.92% at its weekly Treasury bill auction held yesterday, while the WAvg on the 364-day bill remained steady at 7.10%. The Central Bank of Sri Lanka was successful in accepting an additional amount of Rs. 8.5 billion at the auction against its initial total offered amount of Rs. 12 billion with the 182-day bill and the 91-day bill reflecting 53% and 28% of the of this volume, signalling a shift in market appetite to the shorter durations in comparison to the demand witnessed for the 364-day duration over the past few months.

Activity in secondary bond markets increased yesterday, as yields dipped during the early part of the day by around 5 bp on the liquid two 2018 maturities (i.e. 01.04.18 & 15.08.18) to daily lows of 9.05% and 9.10% respectively on expectations of the outcome at the bill auction against its opening highs of 9.10% and 9.15%. However, subsequent to the release of the auction results, yields were seen increasing once again to its daily highs and closed the day at levels of 9.07/09 and 9.13/16. In addition, a limited amount of activity was witnessed on the shorter durations of 2015’s within the range of 7.25% to 7.35% and the 2016’s within 7.80% to 8.00%. The 182-day bill was quoted at levels of 6.83/90 and the 364-day at 7.05/15 in secondary markets pro auction.

Following the continuous drain out of excess liquidity in money markets through Open Market Operations (OMO) over the past week, surplus liquidity dipped to a five week low of Rs. 10.70 billion yesterday. However, overnight call money and repo rates remained steady to average 6.85% and 6.45% respectively as no Open Market Operations was carried out yesterday. Rupee dips marginally The USD/LKR rate dipped further to close the day at Rs. 130.80/85 against its previous day’s closing of Rs. 130.78/83 on continued importer demand and foreign selling in the stock market. The total USD/LKR traded volume for the previous day (10 February) stood at $ 49.10 million. Some of the forward dollar rates that prevailed in the market were 1-Month: Rs. 131.23, 3-Months: Rs. 132.13 and 6-Months: Rs. 133.68.