Bond yields spike ahead of weekly Treasury bill auction

• Rupee dips towards Rs. 155

By Wealth Trust Securities

The start of the trading week saw secondary market bond yields spike on small volumes following the outcome of the Provincial council elections. Yields increased across the yield curve with trades witnessed on the maturities of 01.07.19, two 2021’s (i.e. 01.03.21 and 01.08.21) 15.05.23 and 01.08.26 at highs of 9.55%, 9.65%, 9.75% each, and 10.06% respectively against its  previous day’s closing levels of 9.10/20, 9.33/40, 9.45/50, 9.52/60 and 9.77/85. In the secondary bill market, December 2018 maturities were traded within the range of 9.02% to 9.18% as well.

At Wednesday’s treasury bill auction, the total offered amount will be Rs. 28.5 billion consisting of Rs. 4 billion on the 91 day maturity, Rs. 11.5 billion on the 182 day maturity and Rs. 13 billion on the 364 day maturity. At last week’s auction, the weighted averages increased across the board to 7.75%, 7.99% and 8.94% respectively.

The total secondary market Treasury bond/bill transacted volumes for 9 February was Rs. 3.62 billion.

In money markets, the overnight call money and repo rates averaged at 8.13% and 7.56% respectively as the OMO department of Sri Lanka was seen draining out an amount of Rs. 10 billion on an overnight basis by way of a repo auction at a weighted average of 7.25%. The net liquidity surplus stood at Rs. 22.36 billion yesterday.

Furthermore the OMO (Open Market Operations) Department of the Central Bank of Sri Lanka drained out an amount of Rs. 1.00 billion by way of a term Repo auction at weighted average of 7.51% for a period of 28 days.

Rupee dips considerably  

The USD/LKR rate on spot contracts dipped considerably yesterday to a new low of Rs. 154.90/00 subsequent to opening at Rs. 154.25/40 in comparison to its previous day’s closing level of Rs. 154.28/35 on the back of bank buying interest. The total USD/LKR traded volume for 9 February was $ 45.19 million. Some of the forward USD/LKR rates that prevailed in the market were one month – 155.65/75; three months – 157.35/45 and six months – 159.90/00.