Secondary market bond yields increase for first time in three weeks

By Wealth Trust Securities

Fuelled by renewed selling interest, the secondary market bond yields increased during the week, reflecting a parallel shift upwards of the overall yield curve, for the first time in three weeks. 

The increase in the weighted average yield of the 364 day bill at the weekly primary auction could also be a contributory factor towards the rise in secondary market rates. 

The yields of the liquid maturities of 15.09.19, 01.05.20, two 2021’s (i.e. 01.03.21 and 15.12.21), 01.08.26, 01.09.28 and 15.05.30 increased to intraweek highs of 9.85%, 9.90%, 10.07%, 10.15%, 10.30%, 10.60% and 10.63% respectively against its previous week’s closing levels of  9.55/70, 9.72/80, 9.85/93, 9.92/00, 10.03/12, 10.20/30 and 10.45/50. 

Furthermore, the 15.01.19, 01.08.21, 01.09.23 and 01.01.24 maturities too were seen changing hands at highs of 9.60%, 10.07% and 10.30% respectively.

Nevertheless, the foreign holding in rupee bonds was seen increasing further to record an inflow of Rs. 1.41 billion for the week ending 15 November. 

The daily secondary market treasury bond/bill transacted volume for the first four days of the week averaged Rs. 5.24 billion.

In money markets, the Open Market Operations (OMO) Department was seen draining out liquidity throughout the week on an overnight basis at a weighted average yield of 7.25% in addition to draining out a further amount of Rs. 4.5 billion by way of an outright sale of a 42-day Treasury bill at a weighted average rate of 8.32%. The average net surplus liquidity in the system stood at Rs. 26.70 billion. 

This in turn resulted in the overnight call money and repo rates averaging 8.14% and 7.63% respectively.

 Rupee depreciates during the week  

The USD/LKR rate on spot contracts depreciated during the week to close the week at levels of Rs. 153.70/75 against its previous week’s closing level of Rs. 153.55/65 on the back of importer demand. 

The daily USD/LKR average traded volume for the four days of the week stood at $ 70.70 million. 

Some of the forward dollar rates that prevailed in the market were one month - 154.45/55; three months - 156.35/45 and six months - 158.90/00.