Secondary market bond yields see saw following rejection of bond auction

Friday, 17 April 2015 04:18 -     - {{hitsCtrl.values.hits}}

By Wealth Trust Securities In secondary bond markets, yields were seen increasing during morning hours of trading yesterday leading to the Treasury bond auction of 01.07.2019 for a volume of Rs 5 billion. Yields on the liquid maturities of 01.06.2018, 15.09.2019, 01.06.2020, 01.08.2021 and 01.09.2023 was seen increasing to intraday highs of 8.27%, 8.48%, 8.90%, 9.05% and 9.45% respectively as volumes changing hands remained high. However, following the outcome of the auction at where all bids were rejected, the first such occurrence in five years, yields was seen tumbling once again on the back of buying interest. Yields hit intraday lows of 8.20%, 8.30%, 8.80%, 8.90% and 9.35% once again. In addition, a limited amount of activity was witnessed on the 15.05.2017 maturity within the range of 7.50% to 7.53% and the 15.03.2025 within 9.70% to 9.75%. Meanwhile, continued demand for shorter tenure maturities saw July, August and January 2015 bills change hands within the range of 6.25% to 6.30%, 6.35% to 6.40% and 6.50% to 6.60% respectively. In money markets, overnight call money and repo rates continued to decline following the policy rate reduction to average 6.18% and 6.13% respectively yesterday. Surplus liquidity continued to remain high at Rs. 81.5 billion as well. Meanwhile, in Forex markets yesterday, the USD/LKR rate on one week and two week forward contracts depreciated further to close the day at Rs 133.60/70 and Rs 133.85/95 respectively. The total USD/LKR traded volume for 15 April 2015 was at US $ 52.75 million. Some of the forward dollar rates that prevailed in the market were 1 Month - 134.17; 3 Months - 135.12 and 6 Months - 136.62.          

 Rupee forwards end weaker; downward pressure persists

Reuters: Rupee forwards ended weaker on Thursday on light importer dollar demand and dealers expect downward pressure on the currency to persist after the central bank in a surprise move on Wednesday cut key monetary policy rates to record lows. Actively traded two-week forwards ended at 133.90/95 per dollar, down from Wednesday’s close of 133.78/85, while one-week forwards closed steady at 133.60 per dollar amid moral suasion by central bank. Dealers said one-month forwards finished at 134.15/25 per dollar, compared with the previous close of 134.05/15. “Unless the central bank boosts the reserves either through inflows or borrowing, it will be difficult to prevent the fall of the rupee,” a currency dealer said on condition of anonymity. Finance Minister Ravi Karunanayake on Wednesday said there were sufficient funds to defend the currency and a lot of foreign inflows are expected. Dealers said the Central Bank’s move to reject all bids at a 50-month Treasury Bond yield is to direct the markets on interest rates. The Central Bank through moral suasion prevented the spot rupee from dropping below 132.90/133.20, a limit it set in February. Central bank officials were not immediately available for comment.