Upward momentum in secondary market bond yields continue

By Wealth Trust Securities

The secondary bond market ending 20 January witnessed a week of volatility as yields were seen decreasing at the beginning of the week on the back of fresh foreign buying interest and increasing towards the latter part of the week on renewed foreign selling once again. Yields on the foreign favoured maturities of 01.08.21 and 01.08.24 was seen decreasing to weekly lows of 12.16% and 12.36% respectively during the early part of the week. 

However following the weekly Treasury bills auction at where weighted averages increased across the board for a seventh consecutive week with the 182 day bill hitting a three year eight month high of 10.05%, considerable foreign selling interest was seen returning back to the market driving yields up once again. Foreign participants were seen exiting from the maturities of 15.11.18, 01.07.19 and 01.08.21 at highs of 11.42%, 11.90% and 12.35% respectively. On the back of this momentum, yields were seen hitting weekly highs of 12.40% and 12.47% respectively on the two 2024 maturities (i.e. 01.08.24 and 01.01.24) while on the long end of the curve the 01.09.28 and 15.05.30 maturities were seen changing hands within the range of 12.50% to 12.60% as well. 

The foreign holding in Rupee bonds recorded an outflow of Rs. 3.7 billion for the week ending 18 January 2017.

Meanwhile in money markets, the OMO (Open Market Operations) department of Central Bank was seen mopping up excess liquidity by way of two auctions for outright sales of Treasury bills and overnight repo auctions as  net surplus liquidity averaged a high of Rs. 90.06 billion for the week. The overnight call money and repo rates averaged 8.38% and 8.50% respectively during the week.

Rupee depreciates during the week 

 The USD/LKR rate on active two weeks and one month forward contracts depreciated during the week to close the week at levels of Rs. 150.85/00 and Rs. 151.40/70 against its previous weeks closing level of Rs. 150.55/60 and Rs. 150.98/05 on the back of importer demand coupled with foreign selling in Rupee bonds. 

The daily USD/LKR average traded volume for the first four days of the week stood at $ 95.78 million.

Some of the forward dollar rates that prevailed in the market were three months – 152.80/00 and six months – 155.20/50.