Lacklustre sentiment in bond markets continues

By Wealth Trust Securities

The overall activity in the secondary bond market remained rather moderate during the week ending 4 October as most market participants continued to stay on the sidelines. However, the yield on the liquid 15-year maturity of 15.09.2034 was seen decreasing further during the week to hit a weekly low of 10.74% against its previous weeks closing level of 10.80/82 while the 15.06.27 maturity hit a low of 10.55% as well. 

The yields on the rest of the curve remained rather stable with the maturities of 15.10.21, 01.10.22, two 2023s (i.e. 15.07.23 and 15.12.23) and two 2024s (i.e. 15.06.24 and 15.09.24 changing hands at levels of 8.77% to 8.79%, 9.30%, 9.875% to 9.90%, 10.00% to 10.05% and 10.25% to 10.27% each respectively.

The 364-day bill weighted average yield remained steady at 8.41% for a second consecutive week at its weekly bills auction whilst the weighted average yields of the 91-day and 182-day maturities decreased by two basis points each to 7.60% and 7.73% respectively.

Furthermore, the foreign holding in rupee bonds was seen reversing its decreasing trend witnessed over the previous six weeks to record a marginal inflow of Rs. 522 million for the week ending 2 October.

The daily secondary market Treasury bond/bills transacted volume for the first four days of the week averaged Rs. 6.04 billion.  

In money markets, the overnight call money and repo rates averaged 7.45% and 7.51% respectively for the week as the average overnight net liquidity surplus in the system increased to Rs. 25.26 billion for the week against its previous week’s average of Rs. 20.67 billion.

The overall money market liquidity increased too for a third consecutive week to record a net deficit of Rs. 11.52 billion against its previous week’s net deficit of Rs. 19.91 billion as the OMO department of Central Bank injected in total an amount of Rs. 11.86 billion by way of outright purchases of Treasury bonds on the maturities of 01.05.21, 01.08.21 and 15.10.21 at weighted averages of 8.60%, 8.65% and 8.73% respectively. 

Rupee appreciates

In the Forex market, the USD/LKR rate on spot contracts appreciated during the week to close the week at Rs.181.30/45 against its previous day’s closing levels of Rs.181.85/95 subsequent to trading at a low of Rs.182.37 and a high of Rs.181.39. The appreciation was attributed to export conversions and selling interest by banks.

The daily USD/LKR average traded volume for the first four days of the week stood at $ 58.44 million.

Some of the forward dollar rates that prevailed in the market were one month – 181.80/10; three months – 182.95/15 and six months – 184.60/00.