Bond market yields increase during the week

By Wealth Trust Securities

The secondary bond market remained active during the shortened trading week ending 26 October, with yields continuing its decreasing trend during the early part of the week and increasing towards the latter part, to reflect an upward shift of the overall yield curve on a week on week basis. The upward movement was fuelled by profit taking subsequent to the outcome of the weekly Treasury Bill auction, where the 364 day bill decreased for the first time in five weeks.

Yields of the three 2021 maturities (i.e. 01.03.21, 15.10.21 and 15.12.21) as well as the 15.07.23 maturity hit weekly highs of 10.85%, 10.90% each and 11.42% respectively subsequent to dipping to its weekly opening lows of 10.60%, 10.75%, 10.80% and 11.22%.

The foreign holding in Rupee bonds continued its downward spiral for an eighth consecutive week, recording an outflow of Rs.3.94 billion for the week ending 23 October.

The daily secondary market Treasury bond/bill transacted volume for the first three days of the week averaged Rs.4.71 billion.

In money markets, the average net liquidity shortage in the system stood at Rs.27.76 billion, with the OMO (Open Market Operation) Department of the Central Bank of Sri Lanka injecting liquidity throughout the week on an overnight and term basis at weighted averages ranging from 8.40% to 8.43% and 8.44% to 8.46% for periods of 7 to 15 days respectively. The overnight call money and repo rates averaged at 8.44% and 8.46% respectively, for the week. Furthermore, the OMO Department was also seen infusing liquidity by way of auctions for outright purchases of Treasury bills, where an amount of Rs.7.5 billion was injected in total at weighted averages ranging from 9.39% to 9.91% for periods ranging from 77 days to 273 days.

Rupee dips below Rs.173

In the Forex market, the USD/LKR rate on the spot contracts depreciated further to close the week at a new low of Rs.173.05/20 against its previous weeks closing of Rs.171.65/80 on the back of continued buying interest by banks. 

The daily USD/LKR average traded volume for the first three days of the week stood at $ 62.75 million.

Some of the forward dollar rates that prevailed in the market were 1 Month - 174.00/30; 3 Months - 176.00/30 and 6 Months - 178.95/35