Parallel shift downwards of yield curve during the week

By Wealth Trust Securities

The sharp reduction in primary market Treasury bond averages, the increase in market liquidity to an eight week high coupled with continuous foreign buying in rupee bonds saw secondary market bond yields dip during the week, reflecting a parallel shift downwards of the overall yield curve on a week on week basis for the first time in three weeks. 

Buying interest on the liquid maturities of 15.09.19, 01.05.20, 01.03.21, 01.09.23, 01.08.24 and 01.08.26 saw its yields dip to weekly lows of 11.40%, 11.48%, 11.67%, 12.03%, 12.05% and 12.30% respectively against its previous weeks closing levels 11.46/52, 11.60/70, 11.85/88, 12.15/25, 12.25/30, 12.45/50 and 12.55/60. In addition, 2018 maturities were seen changing hands within the range of 10.75% to 11.20% during the week as well.

Meanwhile, the foreign holding in rupee bonds continued to increase, recording its third consecutive week of inflows. The week ending 24 August saw an inflow of Rs. 6.7 billion while its total outstanding amount exceeded Rs. 300 billion for the first time since 13 January. 

Meanwhile in money markets, overnight call money and repo rates averaged 8.40% and 8.50% respectively as the net liquidity shortfall in the system was seen reducing during the week to average at Rs. 7.31 against its previous weeks average of Rs. 31.73 billion. The Open Market Operations (OMO) Department of Central Bank was seen infusing liquidity during the week by way of overnight reverse repo auctions at weighted averages of 8.39% to 8.43%.

Rupee dips 

during the week 

The rupee on the active spot next and one week forward contracts depreciated during the week to close the week at Rs. 145.70/85 and Rs. 145.85/95 respectively against its previous weeks of Rs. 145.53/60 and Rs. 145.73/78 on the back of importer demand.

The daily USD/LKR average traded volume for the first four days of the week stood at $ 40.45 million.

Some of the forward dollar rates that prevailed in the market were one month – 146.43/60; three months – 148.10/35 and six months – 150.60/85