Secondary market bond yields edge up marginally ahead of Treasury bond auctions

• An upward shift at the belly of the yield curve
• Foreign holding in rupee bonds dips to a two-and-a-half year low

By Wealth Trust Securities

The belly section of the yield curve reflected a marginal upward shift during the week ending 24 July, driven by the weighted averages at the weekly Treasury bills auction increasing for a fourth consecutive week and the announcement of three Treasury bond auctions due today. 

The bond auction conducted in lieu of a Rs. 88.60 billion Treasury bond maturity due on 1 August will consist of Rs. 12.5 billion each on a 3.11 year maturity of 1 July 2019 and a 6.00 year maturity of 1 August 2021 and a further Rs. 15 billion on a 10.00 year maturity of 1 August 2025. 

The liquid maturities of 1 June 2018, 15 September 2019, 1 May 2020, 1 August 2021, 15 October 2021, 1 July 2022, 1 October 2022 and 1 September 2023 were seen dipping to weekly lows of 7.80%, 8.00%, 8.26%, 8.50%, 8.70%, 9.00%, 9.05% and 9.13% respectively during the beginning of the week but was seen increasing from this point onwards once again to hit weekly highs of 8.85%, 8.10%, 8.35%, 8.85%, 9.00%, 9.25%, 9.23% and 9.40% on the back of selling interest and profit taking.

In addition, the 8.4 year maturity of 1 January 2024 and 9.7 year maturity of 15 March 2025 were seen quoted at levels of 9.40/55 and 9.55/75 respectively.

Furthermore, the net foreign outflow in rupee bonds was seen increasing during the week by a further Rs. 4.5 billion carrying the total outflow for the year 2015 to Rs. 53.15 billion, striking a two-and-a-half year low. 

In money markets, the overnight call money and repo rate decreased further during the week ending 24 July to average 6.12% and 5.78% respectively against its previous week’s averages of 6.15% and 5.89% as surplus liquidity averaged high at Rs. 88.58 billion against its previous week’s average of Rs. 85.90 billion. 

 

Rupee appreciates during the week

The rupee appreciated during the week to a high of Rs. 133.70 in comparison to its previous week’s closing level of Rs. 133.80. The daily average USD/LKR traded volume for the first four days of the week was at $ 62.34 million. 

Some of the forward dollar rates that prevailed in the market were one month – 134.25/35; three months – 135.30/40 and six months – 136.70/90.