Bond market ends week on a bullish note

• Bond auctions well received by investors
• Parallel shift downward of the yield curve 
• Foreign outflow witnessed once again 
• CBSL continues to inject liquidity
• Rupee appreciates week on week

By Wealth Trust Securities

The week ending 11 October witnessed renewed buying interest in the secondary bond market, mainly following the bond auctions conducted on Friday, as yields were seen decreasing throughout the week.   

The Treasury bond auctions conducted recorded impressive weighted averages with the 3 year and 5 month maturity of 15 March 2023 coming in at 9.65%, below its pre-auction rate of 9.68/72 while the 10 year and 7 month maturity of 15 May 2030 fetched a weighted average of 10.46%.

The sharpest drop in yields was on the short end of the curve, with the 15.07.23 and two 2024’s (i.e. 15.06.24 and 15.09.24) dipping to weekly lows of 9.65%, 10.05% and 10.10% respectively against its weeks opening highs of 9.80%, 10.15% and 10.25%.  

In addition, the maturities of 15.12.21, 15.06.27 and 15.09.34 were seen changing hands within the range of 8.70% to 8.75%, 10.43% to 10.52% and 10.70% to 10.74% respectively as well. The overall yield curve reflected an uneven parallel shift downward. 

Meanwhile, the foreign holding in rupee bonds was seen decreasing once again, recording an outflow of Rs. 0.10 billion for the week ending 9 October. 

The daily secondary market Treasury bond/bills transacted volume for the first four days of the week averaged Rs. 6.80 billion.   

Meanwhile in money markets, the total liquidity shortage increased marginally by Rs. 1.23 billion to Rs. 12.75 billion during the week as call money and repo rates averaged at 7.46% and 7.50% respectively for the week.  

Furthermore, the OMO department of Central Bank continued to inject liquidity by way of outright purchases of Treasury bonds for a total amount of Rs. 11.02 billion by buying back the maturities of 15.10.21, 15.12.21 and 01.01.22 at weighted averages of 8.68%, 8.71% and 9.25% respectively. 

Rupee appreciates further 

In the Forex market, the rupee was seen appreciating during the start of the week to a weekly high of Rs. 180.35 before retreating marginally to close the week at Rs. 180.65/75 but stronger than its previous weeks closing of Rs. 181.30/45 on the back of demand/supply matrix of banks. 

The daily USD/LKR average traded volume for the first four days of the week stood at $ 73.16 million. Given are some forward dollar rates that prevailed in the market: one month – 181.25/40; three months – 182.45/75; six months – 184.25/65.