Secondary bond market remains active as yields fluctuate

• Foreign selling continues for 16th consecutive week 

By Wealth Trust Securities

The secondary bond market remained active during the week ending yesterday, with yields initially decreasing towards the early part of the week prior to bouncing back up towards the later part.

The yields of the liquid 01.03.21 and 15.03.23 maturities were seen decreasing to weekly lows of 9.42% and 9.81%, respectively, against its previous weeks closing levels of 9.47/53 and 9.80/88. This downward trend was well-supported by the considerable decrease in the weighted average yields of the 15.07.23 maturity by 60 basis points and the 15.03.28 maturity by 52 basis points, at the bond auction held on 13 August when compared against previously recorded average yields of similar maturities, as well as the decrease in yields at the weekly Treasury bill auction.

However, global uncertainty coupled with profit taking resulted in yields increasing once again towards the latter part of the week to hit highs of 9.50% and 10.00%, to close marginally higher than the previous week. Activity was also witnessed consisting of the 2019’s (i.e. 01.07.19 and 15.09.19), 2020’s (i.e. 01.05.20 and 15.12.20), 2021’s (i.e. 01.05.21, 01.08.21, 15.10.21 and 15.12.21), 15.07.23 and 15.03.28 maturities, within the range of 9.04% to 9.10%, 9.25% to 9.35%, 9.46% to 9.80%, 9.87% to 9.98% and 10.20% to 10.30%, respectively.

Meanwhile, the foreign holding of rupee bonds continued to decrease for a sixteenth consecutive week with an outflow of Rs. 0.8 billion during the week ending 15 August.

The daily secondary market Treasury bond/bill transacted volume through the first four days of the week averaged Rs. 15.98 billion.

In money markets, the Open Market Operations (OMO) Department of the Central Bank, started to drain out liquidity by way of overnight repo auctions, at a weighted average yield ranging from 7.52% to 7.62% as the net liquidity surplus in the system stood at Rs. 45.22 billion on average per day. The overnight call money and repo rates averaged 7.94% and 7.91% respectively during the week.

Rupee dips to a low of Rs. 160.55   

 The USD/LKR rate on spot contracts depreciated during the week to a low of Rs. 160.55 and closed at Rs. 160.50/58 against its previous weeks closing levels of Rs. 160.05/10 on the back of continued importer demand.

The daily USD/LKR average traded volume for the first four days of the week stood at $ 68.96 million.

Given are some forward dollar rates that prevailed in the market: one month – 161.30/50; three months – 162.90/20; six months – 165.30/60.