Secondary bond market yield curve remains flat

Monday, 9 September 2019 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities

The secondary market bond yield curve from the belly end to the longer end continued to remain flat during the week ending 6 September as a result of continuous selling interest cantering on the 2023 and 2024 maturities.

Trading activity centred on the liquid maturities of 15.07.23 and two 2024’s (i.e. 15.03.24 and 15.06.24) as its yields were seen increasing during the first four days of the week to weekly highs of 9.95%, 10.07% and 10.17% respectively against its previous weeks closing level of 9.80/85, 9.93/00 and 9.95/99. The upward momentum was further supported by the weekly Treasury bill auction result, where the benchmark 364 day bill weighted average was seen increasing by 11 basis points to 8.33%.

Nevertheless, renewed buying interest at these levels saw yields decreasing once again on Friday with the said maturities hitting lows of 9.80%, 10.00% and 9.95% respectively. In addition the 2021’s (i.e. 01.05.21, 01.08.21, 15.10.21 and 15.12.21), 01.10.22 and 01.08.26 maturities changed hands from weekly highs of 9.00%, 9.05%, 9.00%, 9.25% each and 10.20% to weekly lows of 8.70% each, 8.80%, 8.75%, 9.22%, 10.11% respectively.

The outflow of dollars from the Rupee bond market continued for a third consecutive week recording Rs. 500 million for the week ending 4 September.

The daily secondary market Treasury bond/bills transacted volume for the first four days of the week averaged Rs. 7.99 billion.

In money markets, the total overall liquidity in the system was seen improving to a net deficit of Rs. 22.62 billion against its previous week of Rs. 24.24 billion.

The Open Market Operations (OMO) Department of Central Bank injected liquidity during the week on an overnight basis and term basis (i.e. seven and 14 Days) at weighted average yields ranging from 7.30% to 7.58%. In addition, it injected funds by way of outright purchases of Treasury Bills for dura-tions ranging from 295 to 343 days at weighted averages ranging from 7.83% to 7.97% as well. The overnight call money and repo rates averaged 7.51% and 7.54% respectively for the week.

Rupee loses during the week

In the Forex market, the interbank USD/LKR rate on spot contracts depreciated during the week to close the week at levels of Rs. 180.85/95 against its previous weeks closing level of Rs. 179.00/30 on the back of continued buying interest by banks and portfolio outflows. The daily USD/LKR average traded volume for the first four days of the week stood at $ 64.23 million.

Some of the forward dollar rates that prevailed in the market were 1 month – 181.35/55; 3 months – 182.35/65 and 6 months – 184.00/30.