Foreign buying in rupee bonds continue for 3rd consecutive week as yields dip

By Wealth Trust Securities

The secondary bond market remained active during the week, with considerable buying pressure pushing yields down, reversing an upward trend witnessed earlier. This movement was further fuelled by the outcome of the weekly Treasury bill auction, where the weighted average of the 182 day bill decreased for a fifth consecutive week, and the total accepted amount just falling short of the total offered amount of Rs. 26 billion.

Trades were mainly seen consisting of the liquid maturities of 15.01.19, 15.12.21, two 2023’s (i.e.15.05.23 and 01.09.23) 01.08.24, 01.08.26 and 15.05.30 at weekly lows of 11.00%, 11.43%, 11.60% each, 11.61%, 11.65% and 11.89% respectively when compared against the previous weeks closing levels of 11.10/12, 11.47/50, 11.65/75 each, 11.65/70, 11.70/75 and 11.90/05.

Furthermore, in the secondary market, the demand for bills too continued, with the 182 day maturity changing hands at a level of 10.35%.

Foreign buying of Rupee bonds which had been prevalent over the past two weeks, continued with an inflow of Rs. 3.29 billion during the week ending 24 May.

The daily secondary market Treasury bond transacted volumes for the first four days of the week averaged Rs. 4.65 billion.

In the money market, the overnight repo rate decreased marginally during the week ending 26 May, to average 8.78% as the surplus liquidity increased to Rs. 16.38 billion, from the previous week’s average of Rs. 8.81 billion. The Open Market Operations (OMO) Department of Central Bank of Sri Lanka continuously drained out liquidity by way of overnight repo auctions at weighted averages ranging from 7.26% and 7.28%. The overnight Call money rate remained steady to average 8.75%.

Rupee closes marginally higher

In the Forex market, the USD/LKR rate on the active spot next contracts were seen closing the week marginally higher at Rs. 152.87/92 in comparison to the previous weeks closing levels of 152.95/00, subsequent to trading at levels of Rs. 152.80 to Rs. 153.00.

The daily USD/LKR average traded volume for the four days of the week stood at $ 48.92 million.

Some of the forward dollar rates that prevailed in the market were one month – 153.95/05; three months – 155.90/00 and six months – 158.80/90.