Concerns over liquidity diminish as CB shows intent of injecting term funds

In a move that could add further momentum to the Treasury bill and bond markets, the Central Bank has announced its plans to inject liquidity into the system on a term basis by way of a reverse repo auctions for the first time since January 2013.

Wealth Trust Securities said an amount of Rs. 5 billion was offered yesterday for a period of 14 days. However, all bids were rejected at this auction due to bids submitted been too high according to market sources.

A further reverse repo auction was then subsequently announced for Rs. 11 b for a period of 11 days to be conducted today. Meanwhile, the short fall in overnight liquidity improved to a net deficit of Rs. 1.29 billion yesterday with Rs. 2.43 billion been deposited at the bank’s repo window rate of 7% and Rs. 3.73 billion was accessed from its reverse repo window rate of 9%.

“This intern helped overnight call money and repo rates remain steady to average 9% and 8.33% respectively,” Wealth Trust said.

“However secondary market bond yields reflected an increase yesterday with the more liquid two five year maturities hitting an intraday high of 11.05% and 11.10% respectively against its days opening levels of 11% and 11.03%,” it added.  Buying interest towards the latter part of the day saw yields dip once again to close the day at 11.01/04% and 11.06/09%.

Concerns...

Meanwhile the USD/LKR rate gained to a one month high of Rs. 125.68 yesterday in comparison to its previous day’s closing level of Rs. 126.00 amid tight liquidity. The total USD/LKR volume for the previous day stood at US$ 51.67 million.