Primary bond auction outcomes drive secondary market yields lower

Tuesday, 30 January 2018 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities

The two Treasury bond auctions conducted yesterday were seen recording weighted averages below market expectations with the total offered amount of Rs. 80.00 billion been successfully subscribed. The 5.03 year maturity of 15.05.2023 recorded a weighted average of 9.44% while the new 14.11 year maturity of 15.01.33 recorded a weighted average of 10.05%.

Activity in the secondary bond market picked up following the auction outcomes as yields were seen decreasing. The auction maturities were seen dipping to intraday lows 9.45% and 10.00% respectively while the liquid maturities of the 01.03.21, the two 2026’s (i.e. 01.06.26 and 01.08.26) and 15.06.27 were seen dipping to intraday lows of 9.20%, 9.60%, 9.62% and 9.65% against its previous day’s closing levels of 9.25/30, 9.70/73, 9.70/72 and 9.70/80. In addition, on the short end of the curve, the 2019 maturities traded at levels of 8.95% to 9.05%.

Furthermore, today’s Treasury bill auction will see a total amount of Rs.26.5 billion on offer consisting of Rs.9.5 billion on the 182 day and a further Rs.17 billion on the 364 day maturities while the 91 day bill will not be on offer for a sixth consecutive week. At last week’s auction, the weighted average on the 182 day decreased to 7.96% while the 364 day increased to 8.90%.

The total secondary market Treasury bond/bill transacted volumes for 26 January was Rs.9.37 billion.

In money markets, the weighted average yield of overnight call money and repos remained mostly unchanged to average at 8.14% and 7.57% respectively as the Open Market Operations (OMO) Department of the Central Bank of Sri Lanka was seen draining out an amount of Rs. 2.35 billion on an overnight basis at a weighted average of 7.25% by way of a repo auction. Furthermore it drained out an amount Rs. 2.45 billion by way of three term repo auctions at weighted average yields ranging from 7.35% to 7.52% for periods of 4 days to 28 days as the net surplus liquidity in the system stood at Rs.17.65 billion yesterday.

Rupee dips

once again

In the Forex market, the USD/LKR rate on spot contracts depreciated marginally yesterday to close the day at Rs. 153.75/80 against its previous day’s closing levels of Rs.153. 65/75 on the back of renewed dollar buying interest by banks.

The total USD/LKR traded volume for 26 January was $ 54.00 million.

Some of the forward USD/LKR rates that prevailed in the market were 1 Month - 154.50/65; 3 Months - 156.15/30 and 6 Months - 158.55/65.