Yield curve registers parallel shift upwards for first time in four weeks

• Foreign inflow for second consecutive week
• Money market rates begin to edge down
  
   

By Wealth Trust Securities

The secondary market bond yield curve was seen recording a parallel shift upwards for the week ending 15 March following three consecutive weeks of downward shifts. The upward shift was driven by the outcome of the two Treasury bond auctions conducted at the beginning of the week, where the five-year maturity of 15.03.2024 and the 10 years and two-month maturity of 01.05.2029 recoded weighted averages of 11.04% and 11.35% respectively. 

This was despite the 364-day bill weighted average declining for a third consecutive week to 10.58% at the weekly Treasury bill auction and foreign inflows into rupee bonds and bills continuing for a second consecutive week. The foreign inflow for the week ending 13 March was Rs. 1.16 billion.

In the secondary bond market, yields of the liquid maturities of 15.12.21, 15.03.24, 01.08.26, 15.06.27, 01.09.28 and 01.05.29 were seen hitting weekly highs of 10.78%, 11.11%, 11.15%, 11.35%, 11.37% and 11.52% respectively against its previous weeks closings of 10.63/73, 10.85/00, 11.00/05, 11.10/15, 11.18/25 and 11.25/33. 

However, yields were seen pulling back from its weekly highs on the back of renewed buying interest towards the latter part of the week. Considerable buying interest on secondary market bills saw January to March bills changing hands from a high of 10.59% to a low of 10.40% as well.

The daily secondary market Treasury bond/bill transacted volume for the first three days of the week averaged Rs. 10.65 billion. 

In money markets, the overnight repo rate decreased during the week to average at 8.91% against its previous week’s level of 8.93% as the Open Market Operations (OMO) Department of Central bank was seen injecting liquidity during the week on an overnight basis at a weighted average rates ranging from 8.90% to 9.00% in addition to injecting funds by way of a six to seven day reverse repo auctions at weighted average yields ranging from 8.76% to 9.00%. The total outstanding market liquidity shortfall stood at Rs. 52.10 billion. The overnight call money rate averaged at 8.90% for the week. 

Rupee closes steadily

In Forex markets during the week, the rupee rate on spot contracts closed the week mostly unchanged at Rs. 178.45/55 subsequent trading within the range of Rs. 178.45 to Rs. 178.95.

The daily USD/LKR average traded volume for the four days of the week stood at $ 81.95 million.

Some of the forward dollar rates that prevailed in the market were 1 month – 179.50/70; 3 months – 181.25/50; and 6 months – 184.25/50.