Activity in secondary bond markets picks up as CB injects term funds

By Wealth Trust Securities

Concerns over market liquidity eased despite a net deficit Rs. 13.882 b, as the Open Market Operations (OMO) department of the Central Bank conducted a 12-day reverse repo auction for an amount of Rs. 12.5 b and accepted the same amount at a weighted average of 9.48%.

Furthermore, it also injected Rs. 9 b on an overnight basis at a weighted average of 9.31%. The overnight call money and repo rates remained mostly unchanged to average 9.83% and 8.97% respectively.

Along with the announcement of the term reverse repo auction and its outcome, activity in the secondary bond markets picked up across all maturities ranging from the one-year bond to the five-year bond with high volumes being traded. The four and five year maturities were the more active durations as its yields opened the day at levels of 11.75% and 11.80% respectively and dropped down to intraday lows of 11.20% and 11.25%.

This trend further increased with the announcement of the weekly Treasury bill auction which reflected a decrease for the fourth straight week. The market favorite 364 day maturity reflected a decline of 31 basis points (bp) on its weighted average while a record amount of Rs. 20.7 billion was accepted of this maturity against its initial offered amount of Rs. 12 billion. Furthermore the 182-day maturity reflected a decline of 33 bp as well, a level last seen in March 2012 while the 91-day reflected a decline of 9 basis points on its weighted average.

In the Forex markets the USD/LKR rate appreciated further by around 25 cents to close the day at Rs. 127.45 against its previous day’s closing level of Rs. 127.70. This could be due to some relaxations offered by the Central Bank in its Road Map for the year 2013.

The total USD/LKR volume for the previous working day (1 January 2013) was US$ 24.99 million. Here are some forward dollar rates that prevailed in the market: one month – 128.53; three months – 130.38; and six months – 133.13.