Bond markets remain bullish on speculation of monitory policy outcome
Monday, 16 June 2014 00:00
By Wealth Trust Securities
Yield curve reflects a parallel shift downwards for a third consecutive week
The sentiment in secondary bond markets continued to remain bullish with activity remaining high during the week ending 13 June, ahead of this month’s (June) monetary policy announcement due on 18 June and forecasts of inflation for the medium term.
Once again activity spread along the yield curve from one year durations of 2015’s to 10-year durations of 2024s with a majority centering the belly end of the curve. The most liquid maturity on the curve of 1 July 2019 was seen hitting an 33 month low of 8.66% against its weekly high of 8.74% closely followed by the two 2018 maturities (i.e. 1 April 2018 and 15 August 2018) to 34 month lows of 8.20% and 8.27% respectively against its weekly highs of 8.25% and 8.33%.
Furthermore, activity on the longer end of the curve increased with the seven year maturity of 2021 changing hands within the range of 9.30% to 9.38% and the eight year maturity of 2022 within 9.77% to 9.80% while on the shorter end of the curve 2015 maturities within 7.00% to 7.15%, 2016’s within 7.30% to 7.35% and 2017’s within 7.58% to 7.62%. In secondary bill markets, February 2015 bills were seen changing hands within a range of 6.75% to 6.80% and the 364 day bill within 6.93% to 6.95%, reflecting continued buying interest.
In money markets, surplus liquidity increased towards the later of the week to close the week at Rs. 20.48 b as overnight call money and repo rates remained steady to average 6.96% and 6.53% during the week. The Open Market Operations (OMO) Department of Central Bank was seen mopping up liquidity during the week by way of four day term repo auctions at a weighted averages ranging from 6.61% to 6.84%.
Rupee closes the week steady
In Forex markets, the USD/LKR rate was seen closing the week mostly unchanged at Rs. 130.25/26. The daily average USD/LKR traded volume for the first three days of the week was at $ 68.45 million. Some of the forward dollar rates that prevailed in the market were one month – 130.69; three months – 131.53; and six months – 132.71.