Yield curve reflects parallel shift downwards for third consecutive week

Monday, 4 August 2014 00:15 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities Persistent buying continues during the week Despite inflation increasing for the month of July on its point to point (P to P) to 3.60% against its previous months figure of 2.80% while its annualised average decreased for a record consecutive 47th month to 4.70%, persistent buying in secondary and primary bond and bill markets throughout the week ending 01 August 2014, saw the overall yield curve witnessing a parallel shift downwards for a third consecutive week.

The bullish sentiment was further driven by the outcome of the weekly Treasury bill auction, at where weighted averages were seen declining to historically record low levels seen since 1976. The five year duration of 01st July 2019 was the most sorts after maturity during the week as its yield was seen dipping by 45 basis points (bp) week on week to a low of 7.00% closely followed by the two 2018 maturities (i.e. 01.04.2018 & 15.08.2018) reflecting dips of 36 bp each to lows of 6.93% and 7.00% respectively and the three year maturity of 15 May 2017 dipping by 32 bp to a low of 6.75%. In addition, on the longer end of the yield curve, the nine and a half year duration of 01st January 2024 was seen dipping by 30 bp week on week to a low of 8.15%, the seven year duration of 01st May 2021 by 26 bp to a low of 7.65%, the eight year duration of 01st July 2022 by 18 bp to a low of 7.92% and the two fifteen year durations (i.e. 01.01.2029 and 01.05.2029) by 20 bp each to lows of 9.25%. On the shorter end of the curve, two year durations dipped by 20 bp to a low of 6.60% while in secondary bill markets, the 364 day bill was quoted at levels of 6.45/53. Meanwhile in money markets, Overnight call money and repo rates remained steady to average 6.69% and 6.53% respectively as average surplus liquidity in the system increased to Rs. 41.81 billion against its previous week’s average of Rs. 36.19 billion. Rupee remains steady during the week The USD/LKR rate remained steady during the week to close the week at Rs. 130.21/130.23 as markets were broadly at an equilibrium. The daily average USD/LKR traded volume for the first four days of last week was US $ 63.94 million. Some of the closing forward dollar rates that prevailed in the market were 1 month – 130.47; 3 months – 131.03 and 6 months – 132.08