TBills: A parallel shift upward on the yield curve

By Wealth Trust Securities

Despite yields on secondary bond markets remaining stable during the early part of the week, yields reflected an upward trend during the latter part of the week as weighted averages at the weekly Treasury bill auction increased across the board for a second consecutive week with the total accepted amount reflecting a 18-week low. This resulted in creating a buyer’s market once again which in turn reflected a parallel shift upwards on the yield curve as volumes traded moderated.

Furthermore market participants were seen selling the five-year maturity and buying the 364 day bill in an attempt to reduce duration during the week. The two liquid five-year maturities (i.e. 15 August 2018 and 1 April 2018) closed the week at levels of 11.35%-11.40% in comparison to their last week’s closing levels of 11.23%-11.25%, while the four year maturity edged up to levels of 11.30/40.

In addition, the 364 day bill was seen been quoted at levels of 11.25%-11.30% in comparison its last week’s closing levels of 11.13%-11.18%. Given are the closing, secondary market yields for the most frequently traded maturities.

 Meanwhile in money markets, surplus liquidity increased towards the latter part of the week to Rs. 46.87 b, an averaged Rs. 29.05 b throughout the week. The Open Market Operations (OMO) department of Central Bank was seen mopping up liquidity on a daily basis at a weighted average of 8.35% as overnight call money and repo rates remained steady to average 9.43% and 8.56% for the week.

Rupee appreciates to a one month high

 In Forex markets, the rupee appreciated to a one month high of Rs. 125.90 during the early part of the week. However buying interest at these levels saw the green back close the week at levels of Rs. 126.10 subsequent to hitting a weekly low of Rs. 126.55. The total USD/LKR traded volume for the first four days of this week stood at US$ 80.18 million. Given are some forward dollar rates that prevailed in the market: one month – 127.21; three months – 129.06; six months – 132.06.