Outcome of Treasury Bond auctions leads to heavy volatility in secondary market yields

Friday, 27 March 2015 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities As expected following the trend of the weekly Treasury Bill auctions over the last two weeks, weighted averages (W.Avgs) at yesterday Treasury Bond auctions were seen declining as well. The W.Avg on the 4.06 year maturity of 15 September 2019 was seen dipping by 21 basis points to 8.92% and the 8.05 year maturity of 1 September 2023 by six basis points to 9.73% against its previous W.Avgs. The total accepted amount at the auction was seen increasing to Rs. 39.4 billion against its initial total offered amount of Rs. 30 billion.

Activity in secondary Bond markets continued to remain very high as yields on certain durations were seen fluctuating within a range of 40 basis points during the day. In morning hours of trading, yields were seen declining leading to the auctions as buying interest on the 1 June 2018, 15 September 2019, 1 July 2022 and 1 September 2023 maturities led to yields dipping to intraday lows of 8.24%, 8.48%, 8.90% and 9.30% respectively. However, following the outcome of the auctions, yields were seen increasing once again to hit intraday highs of 8.45%, 8.85%. 9.05% and 9.70%. In money markets, overnight call money and Repo rates averaged 6.60% and 6.54% respectively as surplus liquidity stood at a high of Rs. 94.20 b yesterday.

Rupee remains stable In Forex markets, the rupee on the two week forward contract closed the day mostly unchanged at Rs. 133.70/80 yesterday. The total USD/LKR traded volume for 25 March was at $ 43.75 million. Some of the forward USD/LKR rates that prevailed in the market were: one month – 134.10; three months – 135.15; and six months – 136.75.

Rupee forwards rise on remittances

Reuters: Rupee forwards edged up on Thursday, with one-week forwards rising for the first time in four weeks on dollar inflows from remittances, foreign bond buying and exporters sales, dealers said. Actively traded one-week forwards, which edged up for the first time since 27 February, ended 133.52/57 firmer from Wednesday’s close of 133.60/75. Two-week rupee forwards ended steady at 133.70/75 per dollar compared with Wednesday’s close. “Dollar sales by banks for exporters and inward remittances strengthened the rupee. There were bond inflows also,” said a currency dealer on condition of anonymity, adding that there was no intervention from the Central Bank. Dealers said the downward pressure on the currency was easing with a pick-up in seasonal inward remittances ahead of the Sinhala-Tamil New Year on 14 April. They expect seasonal inward remittances to continue until the first week of April. The Central Bank prevented a fall in the spot rupee at 132.90/133.20 within the limits set by it. Central Bank officials were not available for comment. Dealers said the market may wait for cues on interest rates after t-bill yields fell for two straight weeks. Yields on t-bills fell between 17 and 19 basis points at a weekly auction on Wednesday, after they fell between 31 and 44 basis points last week.