Volatile week ends on positive note

• Foreigners buy into rupee bonds 

By Wealth Trust Securities 

The upward momentum of yields that prevailed in the secondary bond market during the early part of the week reversed towards the later part as a result of the successful outcomes of the primary auctions, where the Central Bank of Sri Lanka (CBSL) accepted an amount of Rs.17.73 billion at the weekly bill auction keeping the 91-day and 182-day weighted averages steady whilst rejecting the 364-day maturity.  

This was followed by the bond auction where the two maturities consisting of 15.10.2021 and 15.03.2028 registered impressive weighted average yields of 9.79% and 10.63% respectively. 

In the secondary bond market, yields on the liquid maturities of 01.10.22, 15.03.23, 15.03.24, 01.08.26, 15.01.27, 01.05.29 dipped to lows of 10.00%, 10.20%, 10.30%, 10.50%, 10.55% and 10.70% respectively when compared against highs of 10.15%, 10.30%, 10.46%, 10.75%, 10.80% and 10.77%, with the two way quotes along the rest of the yield curve reducing as well. 

In the meantime market also witnessed the return of foreign investors as net buyers of rupee bonds to the tune of Rs.311 million for the week ending 12 June. 

The daily secondary market Treasury bond/bills transacted volume for the first four days of the week averaged Rs.11.13 billion.  

In money markets, the overnight call money and repo rates decreased to average at 7.91% and 8.04% respectively for the week as the average net liquidity surplus in the system increased to Rs.40.99 billion. The OMO Department of the CBSL continued to conduct overnight repo auctions throughout in order to drain out liquidity at weighted averages of 7.79% to 7.86%. 

It also further moped up liquidity by way of five day to 10 day term repo auctions at weighted averages ranging from 8.05% to 8.16%. The total money market liquidity also increased to Rs.56.08 billion. 

Rupee loses during the week 

The USD/LKR rate on spot contracts depreciated during the week to close the week at Rs.176.75/90 against its previous weeks closing levels of Rs.176.50/55 subsequent to trading within the range of Rs.176.43 to Rs.176.95. 

The daily USD/LKR average traded volume for the first four days of the week stood at $ 99.65 million.

Some of the forward dollar rates that prevailed in the market were 1 month – 177.45/65; 3 months – 178.95/25 and 6 months – 181.00/30.