Downward trend in secondary market bond yields reverses
Monday, 23 June 2014 00:00
A parallel shift upwards on the yield curve for the first time in four weeksBy Wealth Trust Securities
Following the outcome of June’s monetary policy announcement, where policy rates were held steady for a fifth consecutive month at 6.50% and 8.00%, the downward trend witnessed in secondary bond markets over the previous three weeks reversed during the week ending 20 June, as yields were seen edging up to reflect a parallel shift upwards on the yield curve for the first time in four weeks.
As has been the trend, activity continued to surround the belly-end of the yield curve with yields on the liquid two four year maturities of 2018 and the five year maturity of 1 July 2019 increasing to weekly high of 8.30%, 8.39% and 8.80% respectively against their previous weeks closing levels of 8.18/21, 8.27/30 and 8.66/68.
However, buying interest towards the latter part of the week saw yields close the week lower once again at levels of 8.24/26, 8.32/34 and 8.72/74 respectively. In addition activity was witnessed on the shorter end of the curve with the 1 November 2015 and 15 May 2017 maturities changing hands within the range of 7.08% to 7.10% and 7.65% to 7.68% respectively along with the longer end of the curve where the 1 May 2021 and 1 July 2022 changed hands within the range of 9.33% to 9.38% and 9.79% to 9.84% respectively.
Meanwhile in secondary bill markets, continued demand during the week saw durations centering on the 364-day maturity changing hands within the range of 6.90% to 6.95%, as weighted averages (WAvgs) at the weekly Treasury bill auction continued a steady descending trend with the 91-day and 182-day maturities reflecting dips of 1 basis point each to 6.53% and 6.71% respectively, while the Wavg on the 364-day maturity remained unchanged at 7.00%.
In money markets, overnight call money and repo rates increased marginally to average 6.97% and 6.55% during the week as average surplus liquidity decreased to Rs. 13.42 billion against its previous week’s average of Rs. 14.85 billion.
The Open Market Operations (OMO) Department of the Central Bank continued to mop up liquidity during the week by way of 3 to 77-day term repo auctions at a weighted averages ranging from 6.61% to 6.84%, with the total amount drained dipping to Rs. 51.4 billion against its total offered amount of Rs. 106.5 billion.
Rupee closes the week marginally lower
The USD/LKR rate was seen closing the week marginally lower at Rs. 130.27/30 in comparison to its previous week’s closing of Rs. 130.25/26 on the back of importer demand. The daily average USD/LKR traded volume for the first four days of the week was at $ 63.90 million.
Some of the forward dollar rates that prevailed in the market were 1 Month: Rs. 130.75, 3 Months: Rs. 131.61 and 6 Months: Rs. 132.76.