Primary and secondary Treasury markets continue bullish trend in the New Year
Monday, 6 January 2014 00:00
By Wealth Trust Securities
Continuing with the positive momentum in primary and secondary bill and bond markets leading into 2014 coupled with the announcement of Inflation for the month of December and the final outcome of the weekly Treasury bill auction, yields in secondary bond markets continued its free fall during the week.
Volatility and activity was at its peak levels during the week mainly centering the liquid two four-year maturities (01.04.2018 & 15.08.2018) as it was seen hitting weekly lows of 8.55% and 8.60% respectively against its previous weeks closing levels of 9.60/65 and 9.65/70 subsequent to hitting mid-week highs of 9.13% and 9.22%.
The increase mid-week was following the announcement of the January monetary policy decision, which saw Central Bank hold its Repo rate now termed as its Standing Deposit Facility Rate (SDFR) at 6.50% for a third consecutive month against market expectations, while it reduced its Reverse repo rate now termed as its Standing Lending Facility Rate (SLFR) by 50 basis points to 8.00%.
Nevertheless buying interest from this point onwards on the back of the strategies outlined at Central Bank’s Road Map for 2014 saw yields closing the week lower once again at 8.80/85 and 8.88/95 as the overall yield curve reflected a considerable parallel shift downwards for a sixth consecutive week.
In addition, a considerable amount of activity was witnessed on the five year maturity of 15 January 2019 within a weekly low of 8.75% to a high of 9.50%. Meanwhile demand for secondary market bills continued during the week, mainly centering the 364-day and 182-day maturities to change hands within the range of 7.00% to 7.15% and 7.30% to 7.40% respectively, post its weekly auction.
Meanwhile in money markets, Overnight call money and repo rates remained steady to average 7.64% and 6.99% for the week as average surplus liquidity in the system increased to Rs. 38.67 billion against its last week’s average of Rs. 30.16 billion. The Open Market Operations (OMO) Department of Central Bank was seen mopping up liquidity during the week by way of four to seven days term repo auctions at weighted averages ranging from 7.09% to 7.15%. Interestingly, Central Banks discount window of 8.50% was seen been accessed twice for the week as liquidity dropped to a low of Rs. 3.4 billion on 31 December 2013.
Rupee gains marginally during the week
The rupee closed the week marginally higher at Rs. 130.70/75 against its previous weeks closing of Rs. 130.80/85 subsequent to dipping to a weekly low of Rs. 130.90 on the back of import demand. The daily average USD/LKR traded volume for the first four days of the week was at US $ 48.81 million.
Some of the forward dollar rates that prevailed in the market were 1-Month: Rs. 131.08; 3-Months: Rs. 131.68 and 6-Months: Rs. 132.93.