Bond yields take a U-turn following policy announcement

Wednesday, 25 February 2015 00:00 -     - {{hitsCtrl.values.hits}}

  By Wealth Trust Securities In secondary bond markets, renewed buying interest saw yields dip considerably yesterday following Central Banks monitory policy announcement for the month of February at where policy rates were held steady for a 13th consecutive month at 6.50% and 8.00% while access to the Standing Deposit Facility (SDF) remained rationalised. Activity centered the two year maturity of 15 May 2017, the two three year maturities (1 April 2018 and 15 August 2018) and the seven year maturity of 1 July 2022 as its yields were seen hitting intraday lows of 7.03%, 7.22%, 7.30% and 7.80% respectively against its previous trading day’s closing levels of 7.15/24, 7.40/43, 7.46/52 and 8.00/07. However, profit taking at these levels curtailed any further downward movement for the day. Furthermore, at today’s weekly Treasury bill auction a total amount of Rs. 12 billion will be on offer consisting of Rs. 3 billion each on the 91 day and the 182 day maturities and Rs. 6 billion on the 364 day maturity. At last week’s auction, the weighted averages on the 91 day and 182 day bills increased by six basis points and five basis points to 5.94% and 6.03% respectively while the weighted average on the 364 day bill increased by two basis point to 6.12%. In money markets, overnight call money and repo rates remained mostly unchanged to average 6.02% and 5.59% respectively as the Open Market Operations (OMO) department of Central Bank drained out an amount of Rs. 7.84 billion on a three day basis at a weighted average rate of 5.93%. The surplus liquidity in the system on an overnight basis stood at Rs. 16.81 billion. Activity in Forex markets remains dull The one week forward USD/LKR rate was seen closing the day at Rs. 133.40/50 yesterday while spot and spot next contracts remained steady to close at Rs. 132.90/20 and Rs. 132.92/20 respectively. The total USD/LKR traded volume for 23 February was at $ 99.10 million. Some of the forward USD/LKR rates that prevailed in the market were: one month – 133.70; three months – 134.70; and six months – 136.10.