A parallel downward shift of the overall yield curve

• Foreign holding in rupee bonds continues to increase 

By Wealth Trust Securities

The secondary market bond yields decreased across the yield curve during the week ending 14th July 2017, stemming from the outcome of the primary Treasury bill and bond auctions. Activity centred across the curve, with large volumes changing hands, consisting of both foreign and local participants. 

The liquid maturities of 15.12.21, 15.05.23, 01.08.24 and 01.08.26 dipped to over nine months lows of 11.00%, 11.14%, 11.18% and 11.23% respectively against its previous weeks closing levels of 11.17/20, 11.27/35, 11.32/35 and 11.35/40, while on the short end of the curve, the 15.11.2018 and 15.01.2019 maturities traded within the range of 10.35% to 10.50%.  Furthermore, continued buying interest of T-bills in the secondary market, resulted in the November 2017 bills changing hands at a low of 9.74%.

Meanwhile the foreign holding in rupee bonds was seen increasing once again to record an inflow of Rs.3.3 billion for the week ending 12 July.

The daily secondary market Treasury bond transacted volume for the first four days of the week averaged Rs. 14.49 billion.

In money markets, overnight call money and repo rates averaged at 8.75% and 8.81% respectively during the week, as the Open Market Operations (OMO) Department of the Central Bank of Sri Lanka infused liquidity throughout the week at a weighted average of 8.75%. The net liquidity shortfall for the week stood at Rs. 13.45 billion.

Rupee remains mostly unchanged 

The USD/LKR rate on spot contracts closed the week at Rs.153.68/75 subsequent to changing hands within the range of Rs.153.67 to Rs.153.78 against its previous week’s closing of Rs.153.60/70.

The daily USD/LKR average traded volume for the four days of the week stood at US $ 100.81 million.

Some of the forward dollar rates that prevailed in the market were one month – 154.70/80; three months – 156.60/75; and six months – 159.55/70.