Secondary market bond activity picks up during the week

By Wealth Trust Securities

Activity in secondary bond markets picked up during the week mainly on expectations of an outcome at this month’s (June) monitory policy announcement.

Activity during the week mainly surrounded the two liquid five year maturities (i.e.01.04.2018 and 15.08.2018) and the eight year maturity as it hit weekly lows of 11.03%, 11.08% and 11.43% respectively against its weekly highs of 11.12%, 11.18% and 11.53%.

However yields increased marginally following the monitory policy announcement at where policy rates were held steady to close the week at levels of 11.06/08, 11.11/13 and 11.45/50. Interestingly on the five year yield curve, two illiquid maturities (i.e. 01.02.18 and 15.07.18) were seen been traded at a premium of 8 to 10 basis points above the liquid two maturities and closed the week at levels of 11.20/23 and 11.19/23 respectively. Furthermore considerable volumes of secondary market bills were seen changing hands subsequent to the weekly auction, mainly centring on the 364 day bill with the range of 10.75% to 10.85%.

CBSL mops up liquidity in the system (sub head)

The Open Market Operations (OMO) department of Central bank conducted its first operation in fourteen days as it mopped up liquidity from the system on Thursday by way of a repo auction on an overnight basis at a weighted average (WAvg) of 7.61%. It further mopped up an amount of Rs 6 Bn through a 7 day repo auction at a WAvg of 7.86% on Friday and announced plans of a further Rs 8.8 Bn to be mopped up on Monday by way of outright sales of Treasury bills.  The excess liquidity in the system saw overnight call money and repo rates dip during the week to average 8.67% and 8.37% respectively for the week.    

Rupee appreciates marginally during the week  

The USD/LKR rate appreciated marginally during the week to close the week at levels of Rs 126.38/43 against its previous weeks closing level of Rs 126.48/52. Export conversions coupled with a drop in forward dollar premiums were seen as the reasons behind this according to market sources. The total USD/LKR traded volume for the first four days of this week stood at US $ 49.63 million. Some forward dollar rates that prevailed in the market were 1 Month – 127.18; 3 Months- 128.71 and 6 Months- 130.91.