Yield curve flattens out during the week

Monday, 15 February 2016 00:00 - - {{hitsCtrl.values.hits}}

Foreign selling throughout the week stalls downward shift of the yield curve

Untitled-1 Untitled-2 By Wealth Trust Securities

The secondary market bond yield curve was seen flattening out during the week ending 12 February as continued foreign selling on the belly end of the curve saw its yields hold steady or edge up while buying on the long end saw its yields decline. The yields on the two 2021 maturities (i.e. 01.05.2021 and 01.08.2021) were seen changing hands within the range of 10.45% to 10.55% during the Untitled-3 week while the yields on the two 2022 maturities (i.e. 01.07.2022 and 01.10.2022) and the 01.09.2023 were seen increasing to one month highs of 10.75%, 10.73% and 10.85% respectively on the back of foreign selling. The foreign holding in Rupee bonds dipped by a further Rs 3.01 billion during the week ending 10 February recording its fifth consecutive week of out flows. However buying interest on the long end, mainly on the 01.06.2026, 15.05.2030 and 01.01.2041 saw its yields dip to weekly lows of 11.00%, 11.20% and 11.40% respectively against its weeks opening highs of 11.08%, 11.43% and 11.60%.

The above developments led to a flattening out of the yield curve on the belly end to the long end against a possible shift downwards.

In money markets, the overnight call money and repo rate remained steady during the week ending 12 February to average 6.79% and 6.41% respectively as average surplus liquidity in the system stood at Rs.47.42 billion for the week. The OMO department of Central Bank was seen draining out in total an amount of Rs.13.3 billion from the system through two outright auctions at weighted averages of 6.47% and 6.64% respectively for durations of 17 and 24 days.

Rupee depreciates during the week

The rupee on active one week forward contracts depreciated during the week to close the week at Rs.144.38/42 against its previous week’s closing levels of Rs.144.20/30 on the back of importer demand. The daily USD/LKR average traded volume during the first four days of the week stood at US $ 57.46 million.

Some of the forward dollar rates that prevailed in the market were 1 Month - 144.65/95; 3 Months - 145.95/25 and 6 Months - 147.70/00.