364-day bill doubles accepted amount at weekly auction

As predicted, weighted averages at yesterday’s Treasury bill auction dipped further for an eighth consecutive week.

It was the 91-day bill which reflected the sharpest decline of 16 basis points to 9.47%, while the 182-day bill and the 364-day bill dipped by 13 basis points and 14 basis points respectively to 10.28% and 11.11%.

Interestingly the accepted amount on the 364 day bill was double the initial offered amount of Rs. 15 billion, which in turn helped Central Bank accept in total an amount of Rs. 35.8 b at the auction against its initial offered amount of Rs. 20 b in total.

In secondary bond markets, subsequent to the release of the auction results, the decreasing trend in secondary market bond yields witnessed during early hours of trading yesterday reversed as selling pressure along with profit taking sets in.

The two liquid five-year maturities saw its yields hit an intraday low of 10.75% before it closed the day at levels of 10.85% to 10.88%, as it hit an intraday high of 11.90% on the upward run.

Furthermore the overall yield curve reflected a parallels shift upward during the course of the day mainly driven by the outcome of the bill auction. In secondary market bills the 364-day bill was seen changing hands at levels of 10.90% to 11.00% pre auction and 11.10% to 11.12% subsequent to the auction.

Meanwhile in money markets, overnight call money and repo rates remained steady to average 9.62% and 8.81% respectively as overall surplus liquidity dipped marginally to Rs. 27.74 billion. An amount of Rs. 25 billion was mopped up for a 10th straight day on an overnight basis by way of a Repo auction at a weighted averages of 8.41% while further an amount of Rs. 2.7 b was deposited at Central Bank’s repo window of 7.50%.

Meanwhile, all bids for a planned term repo auction for an amount of Rs. 5 billion with a maturity of seven days and Rs. 10 billion with a maturity of 14 days and an outright sale of Rs. 5 billion with a duration of 29 days was rejected.

The Dollar rupee rate appreciated further yesterday to close the day at Rs. 126.55 in comparison to its previous day’s closing of Rs. 126.65. The total USD/LKR traded volume for the previous day (29 January 2013) stood at US$ 40.25 million. Given are some forward dollar rates that prevailed in the market: one month – 127.54; three months – 129.33; six months – 132.15.