Bond yields dip following monetary policy outcome

By Wealth Trust Securities

The secondary market bond yields were seen decreasing yesterday, reversing its upwards trend witnessed since 20 September 2018, following the highly speculated monetary policy announcement where the Central Bank of Sri Lanka was seen holding policy rates steady at 7.25% and 8.50% for a fourth consecutive announcement.   

The yields on the liquid maturities of 15.10.21 and 15.07.23 were seen decreasing to intraday lows of 10.70% and 10.90% respectively against its previous day’s closing levels of 10.95/05 and 11.15/25. However, profit-taking at these levels saw yields increasing marginally to hit intraday highs of 10.85% and 11.00% once again before bouncing back to close the day lower.  

In addition, activity was witnessed on the two 2021’s (i.e. 01.05.21 and 01.08.21), 15.03.23 and 01.08.26 maturities as its yields dipped as well to trade within the range of 10.81% to 10.89%, 10.90% to 10.95% and 11.20% to 11.23% respectively. 

This was ahead of today’s Treasury bill auction, where a volume of Rs. 6 billion will be on offer consisting of Rs. 2 billion and Rs. 4 billion on the 91 day and the 364 day maturities respectively. At last week’s auction, weighted averages on the 91 day and 364 day maturities increased to 8.56% and 9.51% respectively. 

The total secondary market Treasury bond/bill transacted volumes for 1 October 2018 was Rs. 2.50 billion. 

In money markets, the overnight call money and repo rates averaged 8.44% and 8.26% respectively as the Open Market Operations (OMO) Department of the Central Bank of Sri Lanka was seen injecting an amount of Rs. 12.15 billion on an overnight basis and Rs. 9.75 billion for seven days at weighted averages of 8.16% and 8.25% respectively. It further injected an amount of Rs. 20 billion for 14 days at a weighted average rate of 8.25%, valued today. The net liquidity shortfall remained at a high of Rs. 37.67 billion yesterday. 

Rupee loses

The USD/LKR rate on spot contracts was seen depreciating marginally yesterday to close the day at Rs. 169.20/50 against its previous day’s closing of Rs. 169.00/20 on the back of importer dollar demand. 

The total USD/LKR traded volume for 2 October 2018 was $ 102.00 million. 

Some of the forward USD/LKR rates that prevailed in the market were one month - 170.35/75; three months - 172.30/70 and six months - 175.10/50.