Concerns on liquidity ease as reverse repo auction rate dips

Wednesday, 19 December 2012 02:33 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities

Concerns over market liquidity eased yesterday as only Rs 6 billion was required to be injected by Central Bank into the system through its Open market Operation (OMO) in comparison to the Rs 9.0 billion and Rs 15.5 billion which was infused over the previous two days.

What was considered more encouraging by market participants was the reduction of the weighted average at which this amount was injected, which reflected a dip of 15 basis points (bp) to 12.31% in comparison to its previous such successful auction average of 9.46%. Overnight call money and repo rates remained steady to average 10.21% and 9.33% respectively as overall net liquidity was at a deficit of Rs 7.92 billion, with a further Rs 2.4 billion been accessed from CBSL’s discount widow of 9.50%. Activity in secondary bond markets picked up yesterday, subsequent to the OMO auction results been released with yields dipping marginally mainly on the more liquid 5 year and 6 year maturities. The 5 year maturity reflected a dip of around 8 bp to an intraday low of 12.42%, while the 6 year dipped by 5 bp to a low of 12.80%. Furthermore the 364 day bill was seen changing hands at levels of 12.25% to 12.30% in secondary markets ahead of the weekly Treasury bill auction due today. At last week’s auction, weighted averages on all three maturities dipped by 35 bp, 32 bp and 41 bp respectively to 10.44%, 11.78% and 12.45%.

Given below are the closing, secondary market yields for the most frequently traded maturities

In Forex markets, the rupee lost ground by around 25 cents during early hours of trade yesterday to an intraday low of Rs 128.90 but gained most of its lost ground once again towards the latter part of the day to close the day at Rs 128.78. The total dollar/rupee volume for the previous day (17-12-12) was US $ 64.95 million. Given below are some forward dollar rates that prevailed in the market, 1 Month – 129.79; 3 Months- 131.63 and 6 Months- 134.33.