Upward parallel shift on the second half of the yield curve continues for a second consecutive week
Monday, 24 June 2013 00:02
By Wealth Trust Securities
Activity in secondary bond markets picked up towards the latter part of the week from a slow beginning as yields increased significantly during the week to reflect an upward parallel shift on the second half of the yield curve for a second week running.
This was despite weighted averages (WAvg) on the 182 day and 364 day bills remaining unchanged while the WAvg on the 91 day bill reflected a dip of 1 basis point at its weekly Treasury bill auction. Continued foreign selling on rupee bonds, duration reduction by foreign investors coupled with local selling interest was seen as the main reasons behind the increase in yields according to market sources. Activity was seen mainly on the liquid two five year maturities (i.e. 15.08.2018 and 01.04.2018) and the eight year maturity (01.05.2021) as its yields reflected increases of 27 bp each and 22 bp respectively during the week to weekly high of 11.49%, 11.55% and 11.80% respectively which incidentally was a two month high on the five year maturities and a one and a half month high on the eight year maturity. However secondary market bill yields held steady with the 364 day bill closing the week at levels of 11.78/85.
Given below are the closing, secondary market yields for the most frequently traded maturities,
The Open Market Operations (OMO) department of Central Bank was seen conducting daily and term repo auctions and outright sales of Treasury bills throughout the week in order to drain out excess liquidity from the system, which fluctuated within a weekly low Rs 14.2 Bn to a high of Rs 20.6 Bn. Overnight call money and Repo rates were seen averaging 8.54% and 8.14% respectively for the week with liquidity been drained for durations of 44 days to 51 days with the range of 8.48% to 8.63%.
Rupee fluctuates during the week
The rupee was seen fluctuating within a high of Rs 128 to a low of Rs 129 during the week to close the week at Rs 128.90/95. Foreign selling on rupee bonds, foreign rupee bond holders hedging on forward rupee contacts and importer demand was seen as the main reasons behind the dip while export conversions coupled with selling interest on forward dollar contracts was seen as the reasons behind the gain during the week. The daily USD/LKR average traded volume for the first four days of this week stood at US $ 65.45 million. Given below are some forward dollar rates that prevailed in the market, 1 Month – 129.73; 3 Months- 131.08 and 6 Months- 133.13