Home / Financial Services/ Upward parallel shift of the yield curve

Upward parallel shift of the yield curve


Comments / {{hitsCtrl.values.hits}} Views / Monday, 2 December 2019 00:00




  • Foreign buying in rupee bonds picks up to a 42 week high
  • Inflation decreases for the first time in four months
  • Money market liquidity increases further  
  • Policy rates unchanged

     

By Wealth Trust Securities

The Central Bank of Sri Lanka continued to keep the policy rates steady at 7.00% and 8.00% at its seventh monetary policy announcement for the year 2019, released on Friday 29 November.

The aggressive selling interest during the week ending 29 November saw secondary market bond yields increasing; reversing its positive momentum witnessed the previous week. 

The overall yield curve witnessed a parallel shift upward with the liquid maturities of 2023’s (i.e. 15.03.23 and 15.07.23), 2024’s (i.e.15.03.24, 15.06.24 and 15.09.24), 01.08.26 and 15.06.27 increasing sharply to hit weekly highs of 9.55%, 9.63%, 9.86%, 9.95%, 9.97%, 10.15% and 10.25% respectively against its previous weeks closing levels of 9.10/18, 9.12/20, 9.45/55, 9.50/53, 9.52/55, 9.80/90 and 9.82/92. This upward momentum was further supported by the outcome of the weekly primary bill auction where the weighted average yield of the market favourite 364 day bill increased by 07 basis points to 8.29%. However, the foreign holding in Rupee bonds continued to increase, recording a 42 week high inflow of Rs. 4.28 billion for the week ending 27 November. Furthermore, the Point to Point inflation for the month of November decreased for the first time in four months to register 4.4% against 5.4% recorded in October while the annual average increased to 4.1% from 4.0%.

The daily secondary market Treasury bond/bills transacted volume for the first four days of the week averaged Rs. 13.05 billion. 

In money markets, overnight call money and repo rates decreased marginally to average 7.47% and 7.51% respectively during the week as overall liquidity in the system increased further to Rs. 11.73 billion, in comparison to the previous weeks level of Rs. 6.4 billion. The Open Market Operations (OMO) Department of the Central Bank of Sri Lanka was seen draining out liquidity during the latter part of the week by way of overnight and four day repo auctions at weighted averages of 7.50% to 7.55%.

 

Rupee loses

 In the Forex market, the USD/LKR rate on spot contracts depreciated during the week to close at Rs. 180.90/00 against its previous week’s level of Rs. 180.00/15 on the back of buying interest by Banks. The daily USD/LKR average traded volume for the first four days of the week stood at $ 100.59 million.

Some of forward dollar rates that prevailed in the market were one month – 181.30/50; three months – 182.20/50 and six months – 184.10/40. 

 







 

Samurai bond to be delayed


Share This Article

Facebook Twitter


DISCLAIMER:

1. All comments will be moderated by the Daily FT Web Editor.

2. Comments that are abusive, obscene, incendiary, defamatory or irrelevant will not be published.

3. We may remove hyperlinks within comments.

4. Kindly use a genuine email ID and provide your name.

5. Spamming the comments section under different user names may result in being blacklisted.

COMMENTS

Today's Columnists

Forensic Audits part of bond scam cover-up

Saturday, 25 January 2020

From the time the bond scam was carried out by the Ranil Wickremesinghe administration, that administration under the guidance of the former Prime Minister had been avoiding the law by regularly bringing up various distractions so that the true natur


Halting mega projects is untimely; Govt. can explore other options

Friday, 24 January 2020

In a Sunday newspaper on 5 January a news item titled ‘Mega projects on hold until August budget,’ ‘Drop in revenue after tax reductions prevents spending on major constructions,’ was not a development-friendly headline. It may be accurate o


Is any further expenditure on the Port City a waste of money?

Friday, 24 January 2020

Erase from the mind all that you have read and heard about it. Then take a blank piece of paper, draw an irregular circle, and draw a line to divide it into two. On the bottom half write 300 acres. That is our Port City! To get the size into a proper


Foundations of incivility

Friday, 24 January 2020

The lack of advanced political consciousness and democratic discipline can be considered as one of the main reasons for the crisis and the failure that Sri Lanka is facing. This can be considered a situation that has prevailed since independence. Sri


Columnists More