Yield curve witnesses parallel shift downwards for 4th consecutive week

By Wealth Trust Securities

Secondary market bond yields continued to drop during the week ending 6 November on continued buying interest fuelled by the increase in liquidity to a five month high and the outcome of the weekly Treasury bill auction at where weighted averages declined for a fourth consecutive week. 

The long end of the curve reflected the sharpest declines week on week with the 20 year maturity of 15.03.2035 dipping by 85 basis points (bp) to a low of 9.75%, the 15 year maturity of 15.05.2030 by 80 bp to a low of 9.30% and the 13 year maturity of 01.09.2028 by 58 bp to a low of 9.20% as volumes changing hands remained high. On the belly end of the curve the four year maturity of 01.07.2019 dipped by 35 bp a low of 8.35%, the five year maturity of 01.05.2020 by 34 bp to 8.45%, the six year maturity of 01.08.2021 by 27 bp to 8.65%, the seven year maturity of 01.10.2022 by 20 by to 8.85% and the eight year maturity of 01.09.2023 by 26 bp to 8.80%. In secondary market bills, demand throughout the week saw the 182 day bill change hands within the range of 6.60% to 6.70% post auction.

The drop in Central Bank of Sri Lanka’s holding in government securities to a 10 week low of Rs. 81.77 billion was seen giving further confidence to the bullish sentiment in markets.

Meanwhile in money markets, overnight call money and repo rates remained steady throughout the week to average 6.32% and 6.13% respectively as surplus liquidity in the market increased to a five month high during the week ending 6 November and averaged Rs. 118.99 billion against its previous weeks average of Rs. 74.58 billion.

Rupee dips to a fresh low 

The rupee lost ground to a fresh low of Rs. 141.75 during the week before closing marginally higher at levels of Rs. 141.50/60 in comparison to its previous week’s closing level of Rs. 140.95/05. The daily average USD/LKR traded volumes for the first four days of the week stood at $ 59.76 million. 

Some of the forward dollar rates that prevailed in the market were one month – 141.90/00; three months – 142.85/00 and six months – 144.25/40.