Treasury Bill weighted averages plunge for a second consecutive week

By Wealth Trust Securities

The Central Bank’s borrowing costs plummeted for a second consecutive week across all three maturities at its weekly auction held yesterday.

Once again it was the 364 day bill which reflected the sharpest decline of 27 basis points (bp) to 12.18%, while the 91 day and 182 day bills dipped by 21 bp and 25 bp respectively to 10.23% and  11.53%.

The total amount accepted at the auction was Rs. 2 billion more than the initial offered amount of Rs. 15 billion with the 364 day bill continuing to dominate the auction as it represented 58% of the total accepted amount.

Meanwhile in secondary bond markets yesterday, the overall yield curve reflected a parallel shift downwards mainly dominated by the five year and six year durations. The six year bond witnessed an intraday dip of 58 bp to a low of 12.20% while the five year dipped by 20 bp to 12.15% as volumes changing hands increased considerably.

The outcome of the Treasury bill auction, coupled with the reduction in overnight money market rates were seen as the main reasons behind this bull run following the reduction in policy rates last week.

Furthermore buying pressure on secondary market bills saw the 364 day bill changing hands at levels of 11.80% and the 182 day bill at levels of 11.25% subsequent to the auction.

Liquidity reverses back to a surplus

Money market liquidity on an overnight basis reversed back to a surplus yesterday after a lapse of nine days as Central Bank conducted its first repo auction in 13 days in order to drain out an amount of Rs. 2.5 billion at a weighted average of 8.90%.

This weighted average was considered encouraging once again by market participants as it reflected a dip of 42 bp in comparison to its previous such successful auction.

However, overall net liquidity was higher at Rs. 6.9 billion yesterday as a further Rs. 5.3 billion was deposited at Central Bank’s repo window of 7.50% while Rs. 0.93 billion was accessed from its discount window of 9.50%. In line with the above, overnight call money and repo rates reflected a dip as it averaged 9.93% and 9.10% respectively.

 Rupee gains by 50 cents

In Forex markets the USD/LKR rate appreciated by around 50 cents yesterday to an intraday high of Rs. 128.28 against its previous day’s closing level of Rs. 128.78. The total dollar/rupee volume for the previous day (18 December 2012) was at US$ 51.00 million.

Given are some forward dollar rates that prevailed in the market: one month – 129.29; three months – 131.20 and six months – 134.15.