Rupee soars to 9-month high; Treasury Bills yields’ dip persists

Thursday, 10 January 2013 00:16 - - {{hitsCtrl.values.hits}}

The rupee yesterday rose 0.8% to a nine-month closing high whilst yields on Treasury Bill continued their downward trend, two developments which have reinforced signs of improving macroeconomic fundamentals.

The rupee’s rise to 126.20/30 to the US Dollar from Tuesday’s close of 127.20/30 according to Reuters was boosted by inflows into Government securities and dollar sales by exporters and banks expecting the rupee to strengthen further.

“There were inflows into T-bonds, while exporters also sold dollars,” a currency dealer said on condition of anonymity to Reuters. “On expectation that the foreigners will buy into securities in future and that could result in rupee appreciation, banks and local investors sold dollars.”

Central Bank Governor Ajith Nivard Cabraal told Reuters there would be increase in foreign inflows into Government securities in absolute terms, without increasing the 12.5% limit for foreigners’ holdings of total outstanding Government securities.

Wealth Trust Securities said the rupee gained as much as Rs. 1.25 yesterday to an intraday high of Rs. 126 on expectations of foreign purchases into rupee bonds and a decline in forward dollar premiums.

However, buying interest at these levels saw the dollar gain marginally to close the day at levels of Rs. 126.20/30.The total USD/LKR traded volume for the previous day (4 January 2013) stood at US$ 65.20 million, it added.

Wealth Trust also said weighted averages on Treasury bills declined for a fifth consecutive week at its weekly Treasury bill auction held yesterday. The 182 day bill dipped the most by 18 basis points to 10.81% while the 91 day and 364 day bills dipped by three basis points each to 9.88% and 11.35% respectively.

Interestingly, continued market appetite for the 364 day bill was witnessed as it represented 67% (Rs. 21 billion) of the total accepted amount at the auction. It received Rs. 47.1 billion worth of bids. Overall Rs. 70 billion worth of bids received and Rs. 31.3 billion accepted.

Wealth Trust Securities said subsequent to the release of the auction results, activity in secondary bond markets picked up with considerable volumes of the more liquid five year maturity changing hands within the range of 10.90% to 11.05% while the four year maturity was seen trading within the range of 10.95% to 11%.

This is turn saw the yield curve maintain its inversion as the long tenure yields were seen been traded well below the secondary market rates for the 364 day bill, which is a rare phenomenon. Furthermore the 182 day bill and 364 day bill was seen been traded at levels of 10.60%-10.70% and 11.20%-11.25% respectively in secondary markets.

“However, the market became inactive towards the latter part of the day as market participants was seen eagerly awaiting the outcome of the Treasury bond auction due today,” Wealth Trust said.

In money markets, overnight call money and repo rates remained steady to average 9.80% and 8.84% respectively as surplus liquidity remained at Rs. 4.846 billion yesterday. An amount of Rs. 4.846 billion was deposited at CBSL’s repo window rate of 7.50% once again as the Central Bank refrained from conducting any overnight OMO auctions for a third consecutive day.