Treasury Bill WAY increase for a third consecutive week

Central Bank’s borrowing costs increased for a third consecutive week at its weekly Treasury bill auction held yesterday.

The 364 day bill yields increased the most by 8 basis points (bp) while the 182 day bills reflected an increase of 7 bp. The 91 day bill reflected the least significant increase of 2 bp with only Rs. 0.5 billion of this maturity being accepted. However, the Central Bank’s total requirement was met by accepting more of the 182 day bills.

Subsequent to the release of the auction results, the increasing trend in secondary market bond yields witnessed during the morning hours, continued, with intraday high yields of 12.70% and 12.85% on the more liquid three year and five year maturities.

However, this trend came to a halt subsequent to the announcement of Inflation for the month of October, which reflected a deceleration on the point to point against market expectations. Nevertheless the annualised average increased to an eleven month high of 6.80% from the previous month’s 6.50%.

Meanwhile, overnight call money and repo rates remained mostly unchanged to average 10.54% and 9.67% respectively as money market liquidity increased to a net surplus of Rs. 6.2 billion. Central Bank refrained from conducting any overnight OMO auctions for a third consecutive day as an amount of Rs. 6.6 billion was deposited at its repo window rate of 7.75% while Rs. 0.3 billion was accessed from its discount window rate of 9.75%.

In Forex markets, the USD/LKR rate remained steady yesterday; to close the day at Rs. 130.20/130.25.

The total USD/LKR traded volume for the previous day (30-10-12) stood at US$ 49.25 million.

Given below are some forward dollar rates that prevailed in the market:

1 Month              -              130.67     

3 Months            -              132.99                   

6 Months            -              136.09