Treasury yields continue positive trend for fourth consecutive week
Monday, 23 December 2013 00:47
By Wealth Trust Securities
The expectation on the weekly Treasury bill auction and its final outcome at where weighted averages declined sharply for a 13th consecutive week to 7.73%, 8.19% and 8.53% respectively on the 91 day, 182 day and 364 day maturities saw secondary bond markets continue its bullish run for a fourth consecutive week at the beginning of a shortened week as considerable buying interest set in.
However yields reflected a sudden spike mid-week following the Federal Reserve Open Market Committee (FOMC) decision to trim down its monthly bond buying program to $75 billion from its present $85 billion effective January 2014 as the most active two 2018 maturities (i.e. 1 April 2018 and 15 August 2018) were seen hitting weekly highs of 11.10% and 11.15% respectively against their weekly lows of 9.66% and 9.70%.
Nevertheless, buying interest once again pulled yields back as it was seen closing the week at levels of 9.92/95 and 9.97/00 as the overall yield curve reflected a parallel shift downwards for a fourth consecutive week. In addition, limited amount of activity was witnessed on the 2015 maturities within the range of 8.75% to 8.90%, 2016 maturities within the range of 8.95% to 9.10%, 2017 maturities within 9.20% to 9.50% and the 2021 maturity within 10.20% to 10.75%. In secondary bill market, continued demand post auction for the 182 day and 364 day bills and duration centering it saw it change hands within the range of 7.85% to 8.00% and 8.30% to 8.45% respectively.
Meanwhile in money market, the overnight call money and repo rates remained steady to average 7.74% and 7.03% for the week despite surplus liquidity fluctuating within a weekly high of Rs. 38.81 billion to a low of Rs. 12.90 b.
The Open Market Operations (OMO) Department of Central Bank was seen mopping up liquidity during the week by way of two term repo auctions totaling up to Rs. 11.7 b for durations of two days and 35 days at WAvgs of 7.00% and 7.61% respectively. Furthermore it carried out two outright auctions as well, totalling Rs. 3 b for durations of 56 days and 63 days. However, only an amount of Rs. 1 b in total was drained out through the 56 day bill at a WAvg of 7.60% as the 63 day auction did not receive any bids.
Rupee strengthened during the week
The rupee gained to a high of Rs.130.70 during the week on the back of seasonal remittances and export conversions in comparison to its previous week’s closing level of 130.82/85. The daily average USD/LKR traded volume for the first three days of the week was at US$ 90.48 million.
Some of the forward dollar rates that prevailed in the market were: one month – 131.22; three months – 132.27; and six months – 133.97.