Secondary market bond yields decrease during the week on rating upgrade

Monday, 27 November 2017 00:46 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities

The start of the week ending 24 November 2017 saw Sri Lanka’s rating outlook being upgraded to stable from negative by Standard and Poor’s rating agency.

This in turn led to secondary market bond yields decreasing during the week, reversing an upward trend witnessed over the previous week. The dip in weighted averages at the weekly Treasury bill auction on the 91-day and 182-day bills for a fifth consecutive week contributed to the change in sentiment as well.

A majority of activity was witnessed on the short-term maturities of 01.04.18, 15.09.19, 01.05.20 and the four 2021’s (i.e. 01.03.21, 01.05.21, 01.08.21 and 15.12.21) closely followed by the midterm maturities of 01.09.23 and 01.08.26 as its yields were seen dipping to lows of 8.45%, 9.59%, 9.78%, 9.95%, 9.97%, 10.00%, 10.02%, 10.10% and 10.22% respectively against its previous week’s closing levels of 8.65/75, 9.70/80, 9.90/00, 10.05/15, 10.00/15 each, 10.10/15, 10.20/30 and 10.30/35.

Continued buying interest in secondary market bills saw January 2018 bills changing hands at lows of 8.05% post auction while May, August, September and November durations were exchanged at lows of 8.80%, 9.02%, 9.05% and 9.35% respectively.

Furthermore, the foreign holding of rupee bonds was seen continuing to increase by a further Rs. 0.97 billion for the week ending 22 November, recording its 11th consecutive week of inflows.

The daily secondary market Treasury bond/bill transacted volume for the first four days of the week averaged Rs. 4.27 billion.

In money markets, the overnight repo rate decreased marginally during the week to average 7.57% as the average net surplus liquidity in the system stood at Rs. 25.65 billion for the week. The Open Market Operations (OMO) Department drained out liquidity throughout the week on an overnight basis at a weighted average yield of 7.25% while the Central Bank of Sri Lanka’s Treasury bill holding dipped to Rs. 21.72 billion.

Rupee closes mostly unchanged

The USD/LKR rate on spot contracts was seen fluctuating within the range of Rs. 153.58-Rs. 153.85 during the week before closing the week, mostly unchanged at Rs. 153.70/80.

The daily USD/LKR average traded volume for the four days of the week stood at $ 67.82 million. Some of forward dollar rates that prevailed in the market were one month - 154.50/65; three months - 156.30/50 and six months - 159.05/20.