Continued bearish sentiment keeps secondary bond markets broadly at bay

Monday, 19 August 2013 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities The bearish sentiment in bond markets continued for a second consecutive week as activity dried up considerably and yields edged up marginally for the week ending 16 August. The increase in yields was mainly seen on a three and a half-year maturity and the liquid two five-year durations (i.e. 01 April 2018 and 15 August 2018) as it was seen hitting intraweek highs of 11.30%, 11.32% and 11.37% respectively in very thin trade. However, the primary and secondary bill markets reflected more of a bullish sentiment due to considerable buying interest as its yields were seen edging down during the week, firstly at the weekly primary auction as the weighted averages (WAvg) on the 91-day and 182-day bills were seen dipping by 2 basis points (bp) and 1 bp respectively to 8.61% and 10.56% while the Wavg on the 182-day bill was steady at 9.66% and thereafter in secondary markets as the 364-day bill was seen changing hands within the range of 10.50% to 10.52%, with the March 2014 bills within the range of 9.90% to 10.05%. Meanwhile the Central Bank kept its policy rates on hold for a third consecutive month at 7.00% and 9.00% at its August policy announcement on Friday.

Meanwhile liquidity in money markets dipped towards the latter part of the week to close the week at Rs. 5.47 billion following a weekly high of Rs. 25.4 billion. The Central Bank refrained from conducting any Open Market Operations (OMO) on Friday against a series of daily and term repo auctions it conducted during the rest of the week in order to mop up excess liquidity. However, overnight call money and repo rates remained steady throughout the week to average 8.66% and 8.06% respectively for the week. Rupee fluctuates during the week The rupee was seen fluctuating within a one month high of Rs. 131.38 and a weekly low of Rs. 131.75 during the week. The gain during mid-week was attributed to dollar inflows into the system coupled with selling interest on forward dollar contracts while the drop on Friday was attributed to importer demand. The daily average USD/LKR traded volume for the first four days of the week was at $ 62.26 million. Some of the forward dollar rates that prevailed in the market were 1-Month: Rs. 132.55, 3-Months: Rs. 134.05 and 6-Months: Rs. 136.28.