Secondary bond market yields resilient ahead of policy announcement

Monday, 19 May 2014 00:00 -     - {{hitsCtrl.values.hits}}

By Wealth Trust Securities As markets eagerly awaited the outcome of this month’s monetary policy announcement due next week on the 20 May, secondary market bond yields were remained mostly unchanged for the week ending 16th May in comparison to its previous week’s closing levels. Activity was mainly witnessed on the 01.04.2018 and 01.07.2019 maturities within the range 8.47% to 8.49% and 8.94% to 8.97% respectively. In addition the 2015, 2016 and 2017 maturities were seen changing hands within the range of 7.14% to 7.22%, 7.58% to 7.63% and 7.95% to 8.03% respectively while a limited amount of activity was witnessed on the longer leg of the yield with the 1 May 2021 and 1 July 2022 maturities been traded within the range of 9.65% 9.70% and 9.97% to 9.99% respectively. Meanwhile in secondary bills market, yields were seen decreasing during the week due to buying interest mainly on the durations ranging from three to eight months as those were seen changing hands within the range of 6.60% to 6.80%. This was in line with the outcome of the weekly bill auction, where the weighted average (WAvg) on the 91 day bill dipped by one basis point while WAvg 182 day and 364 day bills remained unchanged. Meanwhile in money markets, Overnight call money and repo rates remained steady to average 6.96% and 6.53% for the week as surplus liquidity in the system averaged at Rs. 20.04 billion for the week as well despite liquidity reducing to a weekly low of 0.92 billion on 13 May. The Open Market Operations (OMO) Department of Central Bank was seen mopping up surplus liquidity during the week by way of four to seventy seven days term repo auctions at weighted averages ranging from 6.60% to 6.83%. Interestingly, CBSL’s Standing Lending Facility Rate (SLFR) of 8.00% was seen been accessed for the first time in four months on 13 May. Rupee appreciates further during the week The rupee continued to appreciate during the week to a high of Rs.130.35 on the back of export conversions, reduced importer demand coupled with equity inflows to Colombo stock market. The daily average USD/LKR traded volume for the first two days of the week was at $ 94.03 million. Some of the forward dollar rates that prevailed in the market were: one month – 130.83; three months – 131.83; and six months – 133.37.