Yields on shorter tenure maturities decline during the week
Tuesday, 23 July 2013 00:49
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By Wealth Trust Securities
Continued buying interest on shorter tenure bond and bill maturities saw its yields decline during the week, while longer tenure yields held steady.
This was mainly due to Central Bank’s borrowing costs decreasing further at its weekly Treasury bill auction as the 182 day and 364 day bill weighted averages dropped to 9.66% and 11.59% respectively and surplus liquidity averaging a very healthy Rs. 22 billion for the week.
In line with this, demand for secondary market bills was evident during the week; mainly surrounding the 364 day maturity as it was seen changing hands within the range of 10.52% to 10.55% during the latter part of the week.
Meanwhile, the liquid two five year maturities (1.4.2018 and 15.08.2018) continued to dominate secondary market bond activity during the week as it was seen changing hands within weekly highs of 11.32% and 11.40% and lows of 11.24% and 11.34% respectively. In addition, the three year maturity reflected some degree of activity as well, within the range of 10.92% to 11.00% during the week.
Overnight money market liquidity decreased considerably during the week, from a high of Rs. 34.1 billion during the start of the week to a low of Rs. 6.41 billion by the latter part of the week. Unsterilized dollar sales into the system coupled with a drop in Central Bank’s Treasury bill holding were seen as the reasons behind the decline in liquidity according to market sources.
The Open Market Operations (OMO) department of Central Bank continued conducting daily repo auctions throughout the week in order to drain out excess liquidity from the system at a steady weighted average ranging from 7.72% to 7.79%, which in turn kept overnight call money and repo rates steady throughout the week to average 8.71% and 8.11% respectively.
Rupee lost ground during
the week
The dollar rupee rate on spot contracts depreciated to a level of Rs. 131.50/131.60 during the week in comparison to its previous weeks closing levels of Rs. 130.95/00. Meanwhile, spot next contracts were seen trading at an intraweek high of Rs. 131.80, subsequent to closing the week at levels of Rs. 131.60/65 as well. The daily average USD/LKR traded volume for the first four days was US$ 40.52 million.
Some forward dollar rates that prevailed in the market were 1 month – 132.35; 3 months – 133.85 and 6 months – 135.95.
