Yield curve reflects parallel shift downwards for first time in 4 weeks

By Wealth Trust Securities

The week ending 4 December saw the bullish sentiment which ignited towards the latter part of the previous week (week ending 27 November) continue in secondary bond markets. 

Buying interest throughout the week saw yields decline, driven by the outcome of the weekly Treasury bill auction where weighted averages declined for an eighth consecutive week. Yields on the liquid maturities of 01.04.2018, 15.09.2019, 01.05.2020, 01.08.2021, 01.10.2022 and 01.09.2023 was seen dipping to weekly lows of 7.90%, 8.57%, 8.65%, 8.95% and 9.05% each respectively from its weeks opening highs of 8.10%, 8.75%, 8.85%, 9.05%, 9.30% and 9.25%. 

In addition, on the long end of the curve, the 01.08.2025 and 15.03.2035 maturities saw its yields dip as well to lows of 9.30% and 9.90% respectively against its highs of 9.40% and 10.10% reflecting a parallel shift downwards of the yield curve for the first time in four weeks. 

Meanwhile, in money markets, the overnight repo rate increased marginally to average 5.91% for the week ending 4 December against its previous week’s average of 5.67% as the OMO (Open Market Operations) department of Central Bank was seen mopping up excess liquidity by way of five auctions for outright sales of Treasury bills for the first time in seven months. However, the overnight call money rate remained steady to average 6.31% as average surplus liquidity stood high at Rs. 130.30 billion for the week. 

Rupee dips further during the week

In forex markets during the week, the depreciating trend on the rupee continued for a fifth consecutive week to close the week at Rs. 143.28/35 against its previous week’s closing of Rs.143.15/30 on back of continued importer demand. The daily USD/LKR average traded volume for the first four days of the week stood at $ 71.69 million. 

Some of the forward dollar rates that prevailed in the market were 1 month - 143.70/80; 3 months - 144.40/50 and 6 months - 145.70/80.